APLD

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How APLD rewrote its risk factors

10-K ITEM 1A · FY2025 → FY2026

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These risks and uncertainties include, but are not limited to, the following: Risks Related to Our Business and Operations • We may be unable to access sufficient additional capital needed to grow our business. • We may be unable to refinance our indebtedness at maturity or the refinancing terms may be less favorable than the terms of our original indebtedness. • In the past we have identified material weaknesses in our internal control over financial reporting and, though remediated, may identify additional material weaknesses in the future or otherwise fail to maintain an effective system of internal controls, any of which may result in material misstatements of our financial statements or cause us to fail to meet our periodic reporting obligations. • We may be unable to complete our data center campuses in a timely manner or within anticipated cost estimates. • Delays in lease commencement could adversely affect our financial condition and results of operations. • Our business has and is expected to continue to have significant customer concentration. • Our consolidated financial statements include the financial results of ChronoScale. • Changes in U.S. trade policy, including the imposition of tariffs and the resulting consequences, may have a material adverse impact on our business, operating results, and financial condition. • We are subject to a highly evolving regulatory landscape and any adverse changes to certain laws or regulations could adversely affect our customers and our business, prospects or operations. • We could incur significant costs related to environmental matters, including from government regulation, private litigation, and existing conditions at some of our properties. • Our business depends upon the demand for data centers. • Any delays or unexpected costs developing our existing space, developable land and newly acquired properties may delay and harm our growth prospects, future operating results and financial condition. • We have substantially concentrated our operations in the state of North Dakota and, thus, are particularly exposed to the regulatory framework and changes in the regulatory environment, market conditions and natural disasters in that state. • Failure to attract, grow and retain a diverse and balanced customer base could harm our business and operating results. • We are continuing to invest in our expansion efforts but may not have sufficient customer demand in the future to realize expected returns on these investments. • We depend upon third-party suppliers for power, and we are vulnerable to service failures and price increases by such suppliers and to volatility in the supply and price of power in the open market. • Any failure of our physical or information technology or operational technology infrastructure or services could lead to significant costs and disruptions. • If we incorrectly estimate our hosting capacity requirements and related capital expenditures, our results of operations could be adversely affected. • Certain natural disasters or other external events, including climate change or mechanical failures, could harm our business, financial condition, results of operations, cash flows, and prospects. • We have an evolving business model which is subject to various uncertainties. • Various actual and potential conflicts of interest may be detrimental to our stockholders. • We may become subject to regulatory inquiry relating to trading activity and/or short selling strategies in our common stock. • The loss of any of our management team, our inability to execute an effective succession plan, or our inability to attract and retain qualified personnel, could adversely affect our business. • We may become involved in litigation arising in the ordinary course of our business that may materially adversely affect us. • Employee disputes or litigation and related unfavorable publicity may negatively affect our future business, financial condition, and operating results. • We may not be able to compete with other companies, some of which have greater resources and experience. • We are establishing data centers in remote areas, which may adversely affect our ability to recruit, retain staff and could increase our compensation costs.
Risks Related to Our Industry • Uncertainty in the global economy and international relations instability and unpredictability, including changes in governmental policies relating to technology, and any potential downturn in the semiconductor and electronics industries, may negatively impact our business. • We depend on significant customers in our HPC Hosting Business and Data Center Hosting Business. • The use and continued pace of developments in AI are inherently uncertain.
Failure by us to keep up with evolving data center requirements and regulatory frameworks for AI, could have a material adverse effect on our business and financial condition. • The development and advancement in the efficiency of AI models presents risks and challenges that may adversely impact our business and operating results.
Risks Related to Our Securities • Our stock price has been volatile and may continue to be volatile in the future; this volatility may affect your ability to, and the price at which you could, sell our common stock. • We have issued, and may in the future, issue new shares of our common stock, which has a dilutive effect on our stockholders. • If securities or industry analysts do not publish research or reports about our business, or if they downgrade their recommendations regarding our common stock , its trading price and volume could decline. • The Convertible Notes (as defined below) may adversely affect the market price of our common stock. • Conversion of the Convertible Notes will dilute the ownership interest of existing stockholders or may otherwise depress the price of our common stock. • The prepaid forward transaction may affect the value of our common stock and may result in unexpected market activity in our common stock. • The capped call transactions may affect the value of the Convertible Notes and our common stock.
Risks Related to Our Business and Operations We may be unable to access sufficient additional capital needed to grow our business.
Construction of our data center campuses, are capital-intensive projects, and we anticipate that our current and future strategic growth initiatives will likewise continue to be capital-intensive.
We utilize debt financings, including high yield bond offerings, in our capital structure and may incur additional debt in the future.
Covenants in the Credit Agreement entered into on May 29, 2026 by and among APLD Intermediate HoldCo LLC, a first-tier subsidiary of the Company (“APLD Intermediate HoldCo”), and certain other subsidiaries of the Company as subsidiary guarantors with First National Bank of Omaha, as administrative agent and collateral agent, and the lenders and issuing banks party thereto (the “Revolving Credit Agreement”) and the indentures governing our notes contain a number of restrictions that impose operating and financial limitations on us and may inhibit our ability to execute our growth strategy or engage in acts that may be in our long-term best interest, including restrictions on our ability to incur additional indebtedness, grant liens on assets, make distributions, dispose of assets, make loans, pay other indebtedness, engage in mergers, and other matters.
In addition, we must maintain compliance with certain financial covenants.
Our ability to meet those financial covenants can be affected by events beyond our control, and we may be unable to meet them.
A breach of the covenants could result in an event of default under our Revolving Credit Agreement or the indentures governing our notes.
Any such default may allow the applicable creditors to accelerate the related debt.
In the event our lenders accelerate the repayment of our borrowings, we may not have sufficient funds to repay that indebtedness.
It is likely that we will need to refinance at least a portion of our outstanding debt.
In the past we have identified material weaknesses in our internal control over financial reporting and, though remediated, may identify additional material weaknesses in the future or otherwise fail to maintain an effective system of internal controls, any of which may result in material misstatements of our financial statements or cause us to fail to meet our periodic reporting obligations.
We may be unable to complete our data center campuses in a timely manner or within anticipated cost estimates.
Our business depends upon the completion and build-out of our AI-focused data center campuses (including the Polaris Forge and Delta Forge Campuses).
Until we complete construction of the facilities required by our customer leases, we will not realize the full amount of projected revenue from those leases.
While our present data center projects are proceeding on time and within our cost expectations, we cannot guarantee we will complete these projects on time or within our anticipated cost estimates, if at all.
The build-out of our data center campuses expose us to significant construction risks, including risks related to construction delays; lack of availability of parts and/or labor; increased prices; work stoppages; unanticipated environmental issues and geological problems; delays related to permitting and approvals from public agencies and utility companies; and delays in site readiness, which may lead to our failure to meet commitments, including missing ready for service dates under our existing and future leases which could result in an adverse effect on our business and results of operations.
Construction-related projects depend on the skill, experience, and performance of designers, contractors, subcontractors and key suppliers.
Should any such party experience financial difficulties or other problems, we could experience significant delays, increased costs and other negative impacts to our expected timelines and returns.
Delays in lease commencement could adversely affect our financial condition and results of operations.
Under certain circumstances, lessees may have the right to terminate applicable leases if there are significant delays in construction.
In the event of a termination, we may not be able to re-lease the applicable data center in a timely or profitable manner.
As a result, a lease termination could adversely affect our financial condition and results of operations.
HPC Hosting Business During fiscal year 2026, this business segment was comprised of one customer accounting for 59% of our total revenue from continuing operations.
This business segment began generating meaningful revenues once the first HPC building within Polaris Forge 1 became operational in fiscal year 2026.
As of the date of this report, we have entered into numerous lease agreements with multiple customers for a combined capacity of approximately 1.4 GW.
As a result, we expect significant growth in revenue from this segment in the coming years.
Due to the limited number of hyperscalers, we expect that a limited number of customers will continue to account for a high percentage of our revenue for the foreseeable future.
Data Center Hosting Business During fiscal year 2026, this business segment was comprised of one customer accounting for 25% of our revenue from continuing operations.
Further, although this customer is currently under a five year contract with us, with one and a half years remaining, they may choose to unilaterally reduce or discontinue their contract with us at any time (subject to notice and certain other provisions).
Our consolidated financial statements include the financial results of ChronoScale.
We recently completed the separation of our cloud business segment into a separate publicly traded company, ChronoScale, of which we currently own approximately 96%.
Although ChronoScale is a separate public company, we expect to continue consolidating its financial results in our consolidated financial statements for so long as we are required to do so under applicable accounting rules.
As a result, the accuracy and timeliness of ChronoScale’s financial reporting, internal control over financial reporting, disclosure controls and procedures, audit process, and related accounting judgments may directly affect our consolidated financial statements and our periodic reports filed with the SEC.
There can be no assurance that ChronoScale will complete its audit or file its annual report on Form 10-K before we are required to finalize and file our own annual report on Form 10-K.
If ChronoScale’s audited financial statements are not available before we complete our financial reporting process, we may be required to consolidate financial information for ChronoScale that is preliminary, unaudited, based on estimates, or otherwise subject to completion of ChronoScale’s audit and year-end reporting procedures.
Those preliminary results may differ from ChronoScale’s final audited financial statements once available, including as a result of audit adjustments, changes in accounting estimates, identification of errors or control deficiencies, impairment analyses, tax adjustments, revenue recognition judgments, valuation matters, or other period-end accounting determinations.

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Gone since FY2025

These risks and uncertainties include, but are not limited to, the following: Risks Related to Our Business and Operations • We are at an early stage of development of our business, currently have limited sources of revenue, and may not be profitable in the future. • We may be unable to access sufficient additional capital needed to grow our business. • We may be unable to refinance our indebtedness at maturity or the refinancing terms may be less favorable than the terms of our original indebtedness. • We have identified a material weakness in our internal control over financial reporting and may identify additional material weaknesses in the future or otherwise fail to maintain an effective system of internal controls, any of which may result in material misstatements of our financial statements or cause us to fail to meet our periodic reporting obligations. • Our business has and is expected to continue to have significant customer concentration. • Changes in U.S. trade policy, including the imposition of tariffs and the resulting consequences, may have a material adverse impact on our business, operating results, and financial condition. • We are subject to a highly evolving regulatory landscape and any adverse changes to certain laws or regulations could adversely affect our customers and our business, prospects or operations. • Our business depends upon the demand for data centers. • Any delays or unexpected costs developing our existing space, developable land and newly acquired properties may delay and harm our growth prospects, future operating results and financial condition. • Our inability to close the sale of our Cloud Services Business that is currently held for sale and treated as discontinued operations may have a material adverse impact on our business and financial condition. • We have concentrated our operations in the state of North Dakota and, thus, are particularly exposed to the regulatory framework and changes in the regulatory environment, market conditions and natural disasters in that state. • Failure to attract, grow and retain a diverse and balanced customer base, including key anchor customers, could harm our business and operating results. • We are continuing to invest in our expansion efforts but may not have sufficient customer demand in the future to realize expected returns on these investments. • We depend upon third-party suppliers for power, and we are vulnerable to service failures and price increases by such suppliers and to volatility in the supply and price of power in the open market. • Our operations could be materially adversely affected by prolonged power outages at any of our facilities. • Any failure of our physical or information technology or operational technology infrastructure or services could lead to significant costs and disruptions. • If we incorrectly estimate our hosting capacity requirements and related capital expenditures, our results of operations could be adversely affected. • Certain natural disasters or other external events, including climate change or mechanical failures, could harm our business, financial condition, results of operations, cash flows, and prospects. • We have an evolving business model which is subject to various uncertainties. • Various actual and potential conflicts of interest may be detrimental to our stockholders. • We may become subject to regulatory inquiry relating to trading activity and/or short selling strategies in our common stock. • The loss of any of our management team, our inability to execute an effective succession plan, or our inability to attract and retain qualified personnel, could adversely affect our business. • We may become involved in litigation arising in the ordinary course of our business that may materially adversely affect us. • Employee disputes or litigation and related unfavorable publicity may negatively affect our future business, financial condition, and operating results. • We could incur significant costs related to environmental matters, including from government regulation, private litigation, and existing conditions at some of our properties. • We may not be able to compete with other companies, some of which have greater resources and experience. • If the award of Bitcoin reward for solving blocks and transaction fees is not sufficiently high, our customers may not have an adequate incentive to continue mining and may cease mining operations, which would have an adverse effect on our business and results of operations. • Intellectual property rights claims may adversely affect the operation of some or all cryptoasset networks. • We are establishing data centers in remote areas, which may adversely affect our ability to retain staff and increase our compensation costs.
Risks Related to Our Industry • Uncertainty in the global economy and instability within international relations, including changes in governmental policies relating to technology, and any potential downturn in the semiconductor and electronics industries, may negatively impact our business. • The use and continued pace of developments in AI are inherently uncertain.
Failure by us to keep up with evolving data center requirements and regulatory frameworks for AI, could have a material adverse effect on our business and financial condition. • Banks and financial institutions may not provide banking services, or may cut off services, to businesses that engage in cryptocurrency-related activities, and turmoil among financial institutions arising from or relating to cryptoassets or in general can materially adversely affect us and our industry. • The impact of geopolitical and economic events on the supply and demand for cryptoassets is uncertain. • Governmental actions may have a materially adverse effect on the cryptoasset mining industry as a whole, which would have an adverse effect on our business and results of operations.
Risks Related to Our Securities • Our stock price has been volatile and may continue to be volatile in the future; this volatility may affect your ability to, and the price at which you could, sell our common stock. • We have issued, and may in the future, issue new shares of our common stock, which has a dilutive effect on our stockholders. • If securities or industry analysts do not publish research or reports about our business, or if they downgrade their recommendations regarding our common stock , its trading price and volume could decline. • Substantial blocks of our common stock may be sold into the market as a result of our Sales Agreements and the PEPA. • The Convertible Notes may adversely affect the market price of our common stock. • Conversion of the Convertible Notes will dilute the ownership interest of existing stockholders or may otherwise depress the price of our common stock. • The prepaid forward transaction may affect the value of our common stock and may result in unexpected market activity in our common stock. • The capped call transactions may affect the value of the Convertible Notes and our common stock.
Risks Related to Our Business and Operations We are at an early stage of development of our business, currently have limited sources of revenue, and may not be profitable in the future.
We are subject to the risks and uncertainties of a new business, including the risk that we may never further develop, complete development of or successfully market any of our proposed services.
We began generating revenue from our crypto mining business in June 2021, however, during the building of our co-hosting operations, we determined that it would be beneficial to our stockholders to focus more of our resources on this line of business than on expanding our mining operations.
Accordingly, in March 2022, we ceased all crypto mining operations.
We began generating revenue from our hosting operations when our first co-hosting facility came online in February 2022.
Accordingly, we have only a limited history upon which an evaluation of our prospects and future performance can be made.
As we grow and develop as a business, we are attempting to reduce the impact of variability on our revenue and hosting costs by entering into long term contracts with the goal of having one blue chip anchor tenant that has signed a 3-5 year long-term contract at each site and filling the rest of the facility with customers with 18-36 month terms.
In our HPC Hosting Business, we plan to enter into long-term leases of approximately 15 years to host tenants’ compute infrastructures encompassing GPU clusters or other high-performance computing resources (and have recently entered into two such leases).
Given that we have not previously operated an HPC data center of this scale, the profitability of these leases cannot be determined at this time.
If we are unable to successfully implement our development plan or to increase our generation of revenue, we will not be profitable in the future and may be unable to continue our operations.
Furthermore, we have a history of operating losses and our proposed operations continue to be subject to all business risks associated with new enterprises.
We incurred net losses of $231.1 million, $149.7 million, and $45.6 million for the fiscal years ended May 31, 2025, 2024, and 2023, respectively.
We expect to continue to incur net losses for the foreseeable future as we grow our business.
We intend to continue scaling our company to increase our customer base and implement initiatives, including new business lines and global expansion.
These efforts may prove more expensive than we currently anticipate and may not result in increased revenue or profitability in the short term or at all.
We will also incur increased compliance costs associated with growth, expanding our customer base, and being a public company.
As we pivot towards new markets, such as HPC data center hosting, we acknowledge that our limited experience in this area may impact our ability to accurately assess our prospects.
The likelihood of our success must be considered in light of the expenses, difficulties, complications, problems and delays frequently encountered in connection with the expansion of a business, operating a business in a competitive industry, and the development of a customer base.
There can be no assurance that we will operate profitably in the future.
We may be unable to access sufficient additional capital needed to grow our business.
Construction of our facilities, including the construction of the Polaris Forge 1 campus, are capital-intensive projects, and we anticipate that our current and future strategic growth initiatives will likewise continue to be capital-intensive.
We utilize debt financings in our capital structure and may incur additional debt in the future.
The terms of the Credit and Guaranty Agreement, dated as of February 11, 2025, by and among APLD HPC Holdings LLC, the subsidiary guarantors, the lenders party thereto and Sumitomo Mitsui Banking Corporation, as administrative agent (the "SMBC Credit Agreement"), require us to meet certain financial covenants, contain other covenants and reference multiple potential events of default, including payment and covenant defaults.
Furthermore, the terms of our Loan Agreement with Starion Bank, dated February 16, 2023 (the "Ellendale Loan Agreement") require APLD ELN-01 LLC, our wholly owned subsidiary (“ELN-01”) to meet certain financial covenants, contain other covenants and reference multiple potential events of default, including payment defaults, covenant defaults and material cross defaults to certain ELN-01 contracts.
On February 28, 2024, APLD GPU-01, LLC, our wholly owned subsidiary, entered into a Loan Agreement with Cornerstone Bank and the Company as Guarantor (the “Cornerstone Bank Loan”).
The terms of the Cornerstone Bank Loan require APLD GPU-01, LLC, our wholly owned subsidiary (“GPU-01”), to comply with certain affirmative and negative covenants and include multiple potential events of default, including payment defaults, covenant defaults (subject to applicable cure periods), and payment cross default to other GPU-01 indebtedness.
Even if we are able to meet our obligations under these debt instruments, the amount of debt we have could adversely affect us by limiting our ability to obtain any necessary financing in the future for our working capital needs, as well as other capital expenditures, debt service obligations, dividend payments, if any, or other purposes.
It also places us at a disadvantage relative to our competitors who may have lower levels of debt, while making us more vulnerable to a downturn in our business or the economy in general.
It is likely that we will need to refinance at least a portion of our outstanding debt, and we plan to replace the SMBC Credit Agreement with permanent project financing.
We have identified a material weakness in our internal control over financial reporting and may identify additional material weaknesses in the future or otherwise fail to maintain an effective system of internal controls, any of which may result in material misstatements of our financial statements or cause us to fail to meet our periodic reporting obligations.
We have identified a material weakness in the design of our internal controls as we did not design and maintain effective controls over the assessment of and accounting for complex financial instruments.
In order to remediate this material weakness, we have hired additional qualified accounting personnel as well as engaged with a third-party consultant to assist with analyzing and documenting the treatment of complex financial instruments.
While we are in the process of remediating this material weakness, there can be no assurance as to when or if we will fully remediate such material weakness.
For further discussion of the material weaknesses identified and our remedial efforts, see Item 9A, Controls and Procedures.
Data Center Hosting Business During fiscal year 2025, this business segment was comprised of four customers accounting for 100% of our revenue from continuing operations.
One of such customers accounted for 93% of our revenue during fiscal year 2025.

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Sentence-level comparison of Item 1A in the two most recent 10-Ks (FY2025 ↗, FY2026 ↗). A reworded sentence counts as one dropped and one added, so heavy edits read as low “kept”. Headings and page furniture are stripped; nothing is summarised by a model.

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