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Commitments and Contingencies | 6 Months Ended
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Nov. 30, 2023
Commitments and Contingencies Disclosure [Abstract] |
Commitments and Contingencies | Commitments and Contingencies Energy Commitment The Company also has a minimum commitment of approximately $89.2 million related to the energy services agreement for its Jamestown, North Dakota co-hosting facility with a remaining term of approximately 3.2 years as of November 30, 2023. Claims and Litigation From time to time, the Company may be involved in litigation relating to claims arising out of operations in the normal course of business. On August 12, 2023, a putative securities class action complaint, captioned McConnell v. Applied Digital Corporation, Wesley Cummins and David Rench, No. 3:23-cv-1805, was filed in the U.S. District Court for the Northern District of Texas, Dallas Division against Applied Digital Corporation (the “Company”) and two of its officers, Chief Executive Officer Wesley Cummins and Chief Financial Officer David Rench, asserting violations of Sections 10(b) and 20(a) of the Securities Exchange Act. The complaint alleges that the defendants made materially false and misleading statements regarding the Company’s business, operations, and compliance policies. Specifically, the complaint alleges that the Company overstated the profitability of its datacenter hosting business and its ability to successfully transition into a low-cost cloud services provider and that the Company’s board of directors was not “independent” within the meaning of NASDAQ listing rules. On November 15, 2023, a putative securities complaint, captioned Robert Weich v. Wes Cummins, Chuck Hastings, Kelli McDonald, Douglas Miller, Virginia Moore, and Richard Nottenburg, No. A-23-881629-C, was filed in the U.S. District Court for Clark County, Nevada against certain members of Applied Digital Corporation’s Board of Directors and two of its officers, Chief Executive Officer Wesley Cummins and Chief Financial Officer David Rench, asserting breaches of fiduciary duties and unjust enrichment from April 2022 through the present. The complaint alleges that the defendants made materially false and misleading statements regarding the Company’s business, operations, and compliance policies. Specifically, the complaint alleges that the Company overstated the profitability of its datacenter hosting business and its ability to successfully transition into a low-cost cloud services provider and that the Company’s board of directors was not “independent” within the meaning of NASDAQ listing rules. The Company is unable to estimate a range of loss, if any, that could result were there to be an adverse final decision in this action. If an unfavorable action were to occur, it is possible that the impact could be material to the Company’s results of operations in the period(s) in which any such outcome becomes probable and estimable. As of November 30, 2023, 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. Settlement of Potential Claim During the second quarter of fiscal year 2024, the Company entered into a settlement agreement with respect to employment-related claims by a former executive. The terms of the settlement included payment to the claimant of $2.3 million, which is included in Loss on legal settlement on our condensed consolidated statements of operations.

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