Applied Digital Corp S-1/A, filed Apr 8, 2022

Applied Digital Corp. (APLD)

S-1/A 2022-04-08

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Added on October 15, 2026

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	Large accelerated filer ☐			Accelerated filer ☐
	Non-accelerated filer ☒			Smaller reporting company ☒
				Emerging growth company ☐

	ABOUT THIS PROSPECTUS					ii
	MARKET AND INDUSTRY DATA					ii
	GLOSSARY FOR CRYPTOASSETS					ii
	PROSPECTUS SUMMARY					1
	RISK FACTORS					10
	SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS					33
	USE OF PROCEEDS					35
	REVERSE STOCK SPLIT					36
	DIVIDEND POLICY					37
	CAPITALIZATION					38
	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS					42
	BUSINESS					48
	DESCRIPTION OF PROPERTIES					58
	LEGAL PROCEEDINGS					59
	MANAGEMENT					60
	EXECUTIVE AND DIRECTOR COMPENSATION					66
	CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS					78
	SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT					79
	DESCRIPTION OF CAPITAL STOCK					81
	SHARES ELIGIBLE FOR FUTURE SALE					87
	SALE PRICE HISTORY OF OUR CAPITAL STOCK					89
	CERTAIN MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES TO NON-U.S. HOLDERS OF OUR COMMON STOCK					90
	UNDERWRITING (Conflicts of Interest)					95
	LEGAL MATTERS					102
	EXPERTS					103
	ADDITIONAL INFORMATION					104
	INDEX TO CONSOLIDATED FINANCIAL STATEMENTS					106

	0% Debt Finance			30% Debt Finance			70% Debt Finance
Capital Expenditure per MW		$	250,000		$	250,000		$	250,000
Total Capital Expenditure for 1.5GW		$	375,000,000		$	375,000,000		$	375,000,000
Amount Financed with Debt		$	0		$	112,500,000		$	262,500,000
Total Capital Contribution		$	375,000,000		$	262,500,000		$	112,500,000
Capital Contribution by Antpool (20%)		$	75,000,000		$	42,500,000		$	22,500,000

	0% Debt Finance		30% Debt Finance		70% Debt Finance
APLD Shares issuable upon Conversion of Antpool Capital Contributions at a $7.50 conversion price		10,000,000		7,000,000		3,000,000
Shares Outstanding after this Offering plus Shares issuable to Antpool		104,441,268		101,441,268		97,441,268
Percentage of APLD Common Stock if Antpool Converted all of its Capital Contributions		9.6%		6.9%		3.1%

	As of November 30, 2021
	Actual			Pro Forma Prior To This Offering			Pro Forma As Adjusted After This Offering
	(in thousands)

Cash and cash equivalents		$	14,045		$	14,045		$	68,687
Mezzanine equity:
Series C convertible and redeemable preferred stock, $.001 par value, 660,000 shares authorized, issued and outstanding, 0 and 0 shares outstanding, respectively			15,135			—			—
Series D convertible and redeemable preferred stock, $.001 par value, 1,380,000 shares authorized, issued and 0 and 0 shares outstanding, respectively			31,574			—			—
Stockholders’ equity
Common stock, $.001 par value, 1,000,000,000, 166,666,666 and 166,666,666 shares authorized, respectively, and 320,381,519, 91,205,023 and 94,441,268 respectively shares issued and outstanding			320			91			95
Additional paid-in capital			43,657			92,601			147,240
Treasury Stock, 6,050 shares, at cost			(62)			(62)			(62)
Accumulated deficit			(44,837)			(44,837)			(44,837)
Total stockholders’ equity			(922)			47,793			102,436
Total capitalization			45,787			47,793			102,436

Assumed public offering price			$	18.54
Historical actual net tangible book value before this offering	$	(0.02)
Increase attributable to pro forma adjustment	$	0.54
Pro forma net tangible book value before this offering	$	0.52
Increase in pro forma net tangible book value attributable to new investors	$	0.56
Pro forma as adjusted net tangible book value after this offering			$	1.08
Dilution to new investors			$	17.46

	Shares Purchased				Total Consideration					Average Price per share
	Amount		Percentage		Amount (in thousands)			Percentage		Average Price per share
Initial Stockholders		91,205,023		96.6%		$	92,692		60.7%		$	1.02
New investors		3,236,245		3.4%		$	60,000		39.3%		$	18.54
Total		94,441,268		100.0%		$	152,692		100.0%		$	1.61

	After Giving Effect to the Reverse Stock Split
Fiscal Quarter End	RSUs Vested		Implied Expense
May 31, 2022		441,666		$	3,551,000
August 31, 2022		800,000		$	6,432,000
November 30,2022		550,000		$	4,422,000

Fiscal Quarter End	Vesting Restricted Stock		Implied Expense
May 31, 2022		300,000		$	2,412,000
August 31, 2022		75,000		$	603,000
November 30, 2022		75,000		$	603,000
February 28, 2023		75,000		$	603,000
May 31, 2023		75,000		$	603,000

Name	Age	Position(s)	Period of Service
Executive Officers
Wes Cummins	44	Chief Executive Officer, Secretary, Treasurer, Chairman of the Board	Director from February 2007 to December 2020 and March 2021 to Present, sole officer from March 2012 to December 2020 and CEO, Secretary and Treasurer from March 2021 to Present
David Rench	44	Chief Financial Officer	March 2021 to Present
Regina Ingel	34	Executive Vice President of Operations	April 2021 to Present
Non-Employee Directors
Chuck Hastings(1)(3)	43	Director	April 2021 to Present
Kelli McDonald(2)(3)	43	Director	April 2021 to Present
Douglas Miller(1)(2)(4)	64	Director	April 2021 to Present
Virginia Moore(2)(3)	48	Director	April 2021 to Present
Richard Nottenburg(1)(2)	68	Director	June 2021 to Present
Jason Zhang	29	Director	April 2021 to Present

Name and position	Year		Salary ($)		Bonus ($)		Total ($)(a)
Wes Cummins		2021		52,083		—		52,083
CEO, President, Secretary and Treasurer		2020		—		—		—
David Rench,		2021		41,667		—		41,667
Chief Financial Officer		2020		—		—		—
Regina Ingel		2021		12,500		—		12,500
Vice President of Operations		2020		—		—		—

Number of Shares	Vesting Date*
250,000		4/1/2022
62,500		7/1/2022
62,500		10/1/2022
62,500		1/1/2023
62,500		4/1/2023

Number of Shares	Vesting Date*
83,333		4/1/2022
20,833		7/1/2022
20,833		10/1/2022
20,833		1/1/2023
20,834		4/1/2023

Number of Shares	Vesting Date*
50,000		4/1/2022
12,500		7/1/2022
12,500		10/1/2022
12,500		1/1/2023
12,500		4/1/2023

Base retainer	$	25,000
Audit Committee Chair	$	15,000
Audit Committee Member	$	8,000

Compensation Committee Chair	$	10,000
Compensation Committee Member	$	5,000
Nominating and Governance Committee Chair	$	5,000
Nominating and Governance Committee Member	$	3,000

	Per Share Bid Price Prior to the Reverse Stock Split						Per Share Bid Price After Giving Effect to the Reverse Stock Split
	High			Low			High			Low
Annual
Year Ended May 31, 2021		$	2.25		$	0.0071		$	13.50		$	0.0426
Quarterly
Year Ended May 31, 2021
First Quarter		$	0.025		$	0.0071		$	13.50		$	0.0426
Second Quarter		$	0.03		$	0.0085		$	0.18		$	0.0510
Third Quarter		$	0.3499		$	0.0153		$	2.10		$	0.0918
Fourth Quarter		$	2.25		$	0.14		$	13.50		$	0.84
Year Ending May 31, 2022
First Quarter		$	2.63		$	0.6275		$	15.78		$	3.765
Second Quarter		$	5.70		$	1.27		$	34.20		$	7.62
Third Quarter		$	4.68		$	1.35		$	28.08		$	8.10

Underwriters			Number of Shares
B. Riley Securities, Inc.
Needham & Company, LLC
Craig-Hallum Capital Group LLC
D.A. Davidson & Co.
Lake Street Capital Markets, LLC
Northland Securities, Inc.
Total

	Per Share	Total Without Over-Allotment	Total With Over- Allotment
Underwriting discounts and commissions paid by us	$	$	$
Proceeds, before expenses, to us	$	$	$

Audited Consolidated Financial Statements:	Page
Report of Registered Independent Public Account Firm		F-1
Consolidated Balance Sheets as of May 31, 2021 and 2020		F-2
Consolidated Statements of Operations for the Annual Period ended May 31, 2021, and 2020		F-3
Consolidated Statements of Changes in Mezzanine Equity and Stockholders’ Deficit for the Annual Period ended May 31, 2021, and 2020		F-4
Consolidated Statements of Cash Flows for the Annual Period ended May 31, 2021, and 2020		F-5
Notes to Consolidated Financial Statements for the Annual Period ended May 31, 2021, and 2020		F-6

Unaudited Consolidated Financial Statements:	Page
Unaudited Consolidated Balance Sheets as of November 30, 2021 and May 31, 2021		F-16
Unaudited Consolidated Statements of Operations for the three and six month periods ended November 30, 2021, and 2020		F-17
Unaudited Consolidated Statements of Changes in Stockholders’ Equity (Deficit) for the three months ended November 30, 2021, and 2020		F-18
Unaudited Consolidated Statements of Stockholders’ Equity (Deficit) for the six months ended November 30, 2021, and 2020		F-19
Unaudited Consolidated Statements of Cash Flows for the six months ended November 30, 2021, and 2020		F-20
Notes to Unaudited Consolidated Financial Statements for the six months ended November 30, 2021, and 2020		F-21

	May 31, 2021			May 31, 2020
ASSETS
Current Assets:
Cash and cash equivalents		$	11,750		$	—
Prepaid expenses and other current assets						—
Total current assets			11,750			—
Deposit on equipment			3,282			—
Property and equipment, net			20			—
TOTAL ASSETS		$	15,052		$	—
LIABILITIES, MEZZANINE EQUITY AND STOCKHOLDERS’ DEFICIT
Current Liabilities:
Accounts payable and accrued liabilities		$	249		$	—
Accrued dividends			116			116
Related party notes payable			2,135			1,899
Total current liabilities			2,500			2,015
Commitments and contingencies (Note 10)
Mezzanine equity:
Series C, convertible and redeemable preferred stock, $.001 par value, 660,000 shares authorized, issued and outstanding			15,135			—
Stockholders’ deficit:
Series A, convertible preferred stock, $.001 par value, authorized 70,000 shares, 27,195 issued and outstanding		$	3,370		$	3,370
Series B convertible preferred stock, $.001 par value, authorized 50,000 shares, 17,087 issued and outstanding			1,849			1,849
Common stock, $.001 par value, 500,000,000 shares authorized, 39,569,335 and 9,066,363 shares issued and outstanding, respectively			9			9
Additional paid in capital			13,874			13,874
Treasury stock, 36,300 shares, at cost			(62)			(62)
Accumulated deficit			(21,623)			(21,055)
Total stockholders’ deficit			(2,583)			(2,015)
Total Mezzanine equity and stockholders’ deficit			12,552			(2,015)
TOTAL LIABILITIES, MEZZANINE EQUITY AND STOCKHOLDERS’ DEFICIT		$	15,052		$	—

	Fiscal Year Ended
	May 31, 2021			May 31, 2020
Total Revenue		$	—		$	—
Costs and expenses:
Selling, General and Administrative			(331)			—
Depreciation			(1)			—
Total costs and expenses			(332)
Operating income (loss)			(332)
Other income (expense)
Interest Expense			(236)			(263)
Total Other Income (Expense)			(236)			(263)
Net Income (loss) attributable to Common Shareholders		$	(568)		$	(263)
Basic and Diluted net loss per share			(0.06)			(0.03)
Basic and Diluted weighted average number of shares outstanding			9,066,363			9,066,363

	Series A Convertible Preferred Stock					Series B Convertible Preferred Stock					Common Stock					Additional Paid in Capital			Treasury Stock			Accumulated Deficit			Stockholders’ Equity
	Shares		Amount			Shares		Amount			Shares		Amount			Additional Paid in Capital			Treasury Stock			Accumulated Deficit			Stockholders’ Equity
Balance, May 31, 2019		27,195		$	3,370		17,087		$	1,849		9,066,363		$	9		$	13,874		$	(62)		$	(20,792)		$	(1,752)
Net Income (Loss)		—			—		—			—		—			—			(263)			(263)			(263)			(263)
Balance, May 31, 2020		27,195		$	3,370		17,087		$	1,849		9,066,363		$	9		$	13,874		$	(62)		$	(21,055)		$	(2,015)
Net Income (Loss)		—			—		—			—		—			—			—			—		$	(568)		$	(568)
Balance, May 31, 2021		27,195		$	3,370		17,087		$	1,849		9,066,363		$	9		$	13,874		$	(62)		$	(21,623)		$	(2,583)

	Fiscal Years Ended
	May, 31, 2021			May, 31, 2020
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss		$	(568)		$	(263)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization			1			—
Accrued paid in kind interest			236			263
Changes in operating assets and liabilities:
Accounts payable and accrued liabilities			248			—
NET CASH USED BY OPERATING ACTIVITIES			(83)			—
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment			(20)			—
Deposit on equipment			(3,282)			—
NET CASH USED IN INVESTING ACTIVITIES			(3,302)			—
CASH FLOWS FROM FINANCING ACTIVITIES
Sale of preferred stock			16,500			—
Issuance cost for preferred stock			(1,365)			—
NET CASH PROCEEDS FROM FINANCING ACTIVITIES			15,135			—
NET INCREASE IN CASH AND CASH EQUIVALENTS			11,750			—
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR			—			—
CASH AND CASH EQUIVALENTS, END OF YEAR		$	11,750		$	—
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Interest paid		$	—		$	—

Class of Stock	Common Share Conversion Ratio	Shares	May 31, 2021	May 31, 2020
Convertible Series A preferred shares	1 to 1429	27,195	38,861,655	38,861,655
Convertible Series B preferred shares	1 to 1000	17,087	17,087,000	17,087,000
Convertible and Redeemable Series preferred shares	1 to 200	660,000	132,000,000	—
Total			187,948,655	55,948,655

	May 31 2021			May 31 2020
Office and computer equipment		$	21		$	—
Total cost of property and equipment			21
Accumulated depreciation			(1)
Property and equipment, net		$	20		$	—

Holder	Interest Rate		Status		Principal Amount			May 31, 2021 Accrued Interest Payable			Total
Related Party		16%		Default		$	220		$	828		$	1,048
Non-Related Party		16%		Default			250			837			1,087
Total						$	470		$	1,665		$	2,135

	May 31, 2021		May 31, 2020
Expected income tax expense (benefit) at U.S. statutory rate		21%		21%
State Tax Expense		0%		0%
Change in Valuation Allowance		-21%		-21%
Income Tax Expense / (Benefit)		0%		0%

	May 31, 2021			May 31, 2020
Deferred Tax Assets:
Federal Net Operating Loss		$	175		$	55
Valuation Allowance			(175)			(55)
Total Net Deferred Tax Assets/(Liabilities)		$	—		$	—

Class of Stock	Ranking	Liquidation Preferences
Redeemable and Convertible Series C shares	Priority 1	Cash equal to $25 per share plus accrued or unpaid Paid in Kind dividends	Ratably share in distribution of assets in proportion to preferential entitled amounts
Convertible Series A preferred shares	Priority 2	Cash equal to $100 per share plus declared or accrued and unpaid dividends	Ratably share in distribution of assets in proportion to preferential entitled amounts
Convertible Series B preferred shares	Priority 3	Cash equal to $100 per share plus declared or accrued and unpaid dividends	Ratably share in distribution of assets in proportion to preferential entitled amounts

Class of Stock	Carrying Value			Accrued Dividends			Accumulating Dividends not Declared			Liquidation Amount
Redeemable and Convertible Series C shares		$	16,500,000		$	—		$	—		$	16,500,000
Convertible Series A preferred shares		$	2,719,500		$	70,821		$	767,500		$	3,557,821
Convertible Series B preferred shares		$	1,708,700		$	45,279		$	402,400		$	2,156,379

Service Provider	Common Stock Shares Committed
Valuefinder		18,938,559
SparkPool		44,640,889
GMR		44,649,889
Total		108,220,337

Agreement Date*	Purchase Commitment			Deposit Paid			Expected Shipping
May 27, 2021		$	4,968		$	—
April 13, 2021		$	8,512		$	3,277	August 2021 – July 2022
Total		$	13,480			3,277

Lease Period	Monthly Base Rent
Months 1 – 13		$	25,856
Months 14 – 25		$	26,525
Months 26 – 37		$	27,193
Months 38 – 49		$	27,862
Months 50 – 61		$	28,531
Month 62 – (10/31/26)		$	29,199

	November 30, 2021			May 31, 2021
				Audited
ASSETS
Current Assets:
Cash and cash equivalents		$	14,045		$	11,750
Prepaid expenses and other current assets			1,649			5
Cryptoassets			—			—
Total current assets			15,694			11,755
Right of use asset, net			1,204			—
Deposit on equipment			26,507			3,277
Property and equipment, net			10,145			20
TOTAL ASSETS		$	53,550		$	15,052
LIABILITIES, MEZZANINE EQUITY AND STOCKHOLDERS’ EQUITY (DEFICIT)
Current Liabilities:
Accounts payable and accrued liabilities		$	5,323		$	248
Accrued dividends			—			116
Current portion of operating lease liability			190			—
Related party notes payable			—			2,135
Customer deposits			484			—
Deferred revenue			526			—
Other current liabilities			16			—
Total current liabilities			6,539			2,500
Deferred tax liability			214			—
Long-term portion of operating lease liability			1,010			—
Total liabilities			7,763			2,500
Commitments and contingencies (Note 10)
Mezzanine equity:
Series C, convertible and redeemable preferred stock, $.001 par value, 660,000 shares authorized, issued and outstanding		$	15,135		$	15,135
Series D, convertible and redeemable preferred stock, $.001 par value, 1,380,000 shares authorized, issued, and outstanding			31,574			—
Total mezzanine’ equity			46,709			15,135
Shareholders’ equity (deficit):
Series A, convertible preferred stock, $.001 par value, authorized 70,000 shares, 0 and 70,000 shares issued and outstanding, respectively		$	—		$	3,370
Series B convertible preferred stock, $.001 par value, authorized 50,000 shares, 0 and 50,000 shares issued and outstanding, respectively			—			1,849
Common stock, $.001 par value, 1,000,000,000 shares authorized, 320,381,519 and 9,066,363 shares issued and outstanding			320			9
Additional paid in capital			43,657			13,874
Treasury stock, 36,300 shares, at cost			(62)			(62)
Accumulated deficit			(44,837)			(21,623)
Total shareholders’ equity (deficit)			(922)			(2,583)
Total Mezzanine and shareholders’ equity (deficit)			45,787			12,552
TOTAL LIABILITIES, MEZZANINE EQUITY AND SHAREHOLDERS’ EQUITY (DEFICIT)		$	53,550		$	15,052

	Three Months Ended						Six Months Ended
	November 30, 2021			November 30, 2020			November 30, 2021			November 30, 2020
Revenues:
Cryptocurrency mining revenue, net		$	1,426		$	—		$	2,038		$	—
Cost of revenues		$	433			—		$	782			—
Gross Profit			993			—			1,256			—
Costs and expenses:
Selling, General and Administrative			1,181			—			1,879			—
Stock-based compensation for service agreement			—			—			12,337			—
Impairment of Cryptocurrency Assets			145			—			165			—
Depreciation			174			—			177			—
Total costs and expenses			1,500			—			14,558			—
Operating income (loss)			(507)			—			(13,302)			—
Other income (expense):
Interest Expense			—			(74)			—			(147)
Gain/Loss on Extinguishment of Accounts Payable			285			—			325			—
Gain/Loss on Extinguishment of Debt			—			—			(1,342)			—
Gain/Loss on Sale of Fixed Assets			265			—			265			—
Income Tax Expense			(214)			—			(214)			—
Total Other Income (Expense)			336			(74)			(966)			(147)
Net Income (loss) attributable to Common Shareholders		$	(171)		$	(74)		$	(14,268)		$	(147)
Basic and diluted net loss per share			(0.00)			(0.01)			(0.05)			(0.02)
Basic and diluted weighted average number of shares outstanding			320,381,519			9,066,363			294,863,883			9,066,363

	Series A Convertible Preferred Stock					Series B Convertible Preferred Stock					Series C Convertible Preferred and Redeemable Stock					Series D Convertible Preferred and Redeemable Stock					Common Stock					Additional Paid in Capital			Treasury Stock			Accumulated Deficit			Mezzanine and Shareholders’ Equity (Deficit)
	Shares		Amount			Shares		Amount			Shares		Amount			Shares		Amount			Shares		Amount			Additional Paid in Capital			Treasury Stock			Accumulated Deficit			Mezzanine and Shareholders’ Equity (Deficit)
Balance, August 31, 2021		—		$	—		—		$	—		660,000		$	15,135		1,304,000		$	29,902		320,381,516		$	3,122		$	40,856		$	(62)		$	(44,666)		$	44,287
Issuance of Preferred Stock		—			—		—			—		—			—		76,000			1,900		—			—			—			—			—		$	1,900
Issuance Costs of Preferred Stock		—			—		—			—		—			—		—			(228)		—			—			—			—			—		$	(228)
Net Income (Loss)		—			—		—			—		—			—		—					—			—			—			—		$	(171)		$	(171)
Balance, November 30, 2021		—		$	—		—		$	—		660,000		$	15,135		1,380,000		$	31,574		320,381,516		$	3,122		$	40,856		$	(62)		$	(44,837)		$	45,787

	November 30, 2021			May 31, 2021
Cryptocurrency mining equipment		$	5,181		$	—
Office and computer equipment			184			21
Autos			63			—
Land & Building			5,153
Total cost of property and equipment			10,581			21
Accumulated depreciation			(436)			(1)
Property and equipment, net		$	10,145		$	20