Applied Digital Shareholder Action Reminder

Securities Litigation Partner James (Josh) Wilson Encourages Investors Who Suffered Losses Exceeding $100,000 In Applied Digital To Contact Him Directly To Discuss Their Options

New York, New York--(Newsfile Corp. - September 19, 2023) - Faruqi & Faruqi, LLP, a leading national securities law firm, is investigating potential claims against Applied Digital Corporation ("Applied Digital" or the "Company") (NASDAQ: APLD) and reminds investors of the October 11, 2023 deadline to seek the role of lead plaintiff in a federal securities class action that has been filed against the Company.

If you suffered losses exceeding $100,000 investing in Applied Digital stock or options between April 13, 2022 and July 26, 2023 and would like to discuss your legal rights, call Faruqi & Faruqi partner Josh Wilson directly at 877-247-4292 or 212-983-9330 (Ext. 1310). You may also click here for additional information:

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Faruqi & Faruqi is a leading minority and Woman-owned national securities law firm with offices in New York, Pennsylvania, California and Georgia.

The complaint alleges that throughout the Class Period, Defendants made materially false and misleading statements regarding the Company's business, operations, and compliance policies. Specifically, Defendants made false and/or misleading statements and/or failed to disclose that: (i) Applied Digital had overstated the profitability of its datacenter hosting business and its ability to successfully transition into a low-cost AI Cloud services provider; (ii) Applied Digital's Board of Directors was not independent within the meaning of NASDAQ listing rules; (iii) accordingly, Applied Digital had overstated the efficacy of its business model and failed to maintain proper corporate governance standards; (iv) the foregoing, once revealed, was likely to subject the Company to significant financial and/or reputational harm; and (v) as a result, the Company's public statements were materially false and misleading at all relevant times.

In April 2022, Applied Digital conducted its initial public offering ("IPO"), issuing 8 million shares of common stock priced at $5.00 per share for a total of approximately $40 million in proceeds. The primary underwriter of the IPO was B. Riley Securities, Inc. ("B. Riley Securities"), an investment bank and subsidiary of the diversified financial services platform B. Riley Financial, Inc. ("B. Riley Financial"). On April 13, 2022, pursuant to the offering documents issued in connection with the IPO (the "Offering Documents"), Applied Digital's securities began trading on the Nasdaq Global Select Market ("NASDAQ").

The Offering Documents described several close connections between Applied Digital and B. Riley. For example, in the "conflicts of interest" section of the IPO Prospectus, Applied Digital stated that, in August 2021, the Company's Chief Executive Officer ("CEO"), Defendant Wesley Cummins ("Cummins"), sold a majority interest in a registered investment adviser controlled by Cummins to B. Riley Financial, and thereafter became President of B. Riley Asset Management. At the time of the IPO, Cummins also served as the CEO and President of B. Riley Capital Management, LLC. Further, the IPO Prospectus stated that two members of the Board, Chuck Hastings ("Hastings") and Virginia Moore ("Moore"), maintained similarly close connections to B. Riley. Specifically, at the time of the IPO, Hastings served as the CEO of B. Riley Wealth Management, Inc. and Moore was married to the CEO of B. Riley Securities.

As a company publicly traded on the NASDAQ, Applied Digital is required to comply with Listing Rule 5605(b)(2), which states that a majority of the Company's board of directors (the "Board") must be comprised of independent directors. Nasdaq Listing Rule 5606(a)(2) defines an independent director as "a person other than an Executive Officer or employee of the Company or any other individual having a relationship which, in the opinion of the Company's board of directors, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director." Notwithstanding the close ties between Applied Digital and B. Riley, the prospectus issued in connection with the IPO (the "IPO Prospectus") nonetheless assured investors that Applied Digital had "structured [its] Board composition and corporate governance in order to meet the requirements of the [NASDAQ]".

On May 15, 2023, Applied Digital announced that it was launching cloud service to "[e]mpower [a]rtificial [i]ntelligence [a]pplications". Eight days later, on May 23, 2023, Applied Digital entered into a loan and security agreement with B. Riley Commercial Capital, LLC and B. Riley Securities. The agreement, the purpose of which Applied Digital claimed was to supply "additional liquidity to fund the buildout of the Company's recently announced AI cloud platform and datacenters by the Company," provided for a term loan in the principal amount of up to $50 million, with an interest rate of 9.00% per annum, and a maturity date of May 23, 2025. However, Applied Digital repaid the total balance of the loan nearly two years ahead of its contractual maturity, a timeframe that corresponded with B. Riley's own efforts to finance its recent acquisition of the holding company Franchise Group, Inc.

In July 2023, market analysts began scrutinizing Applied Digital's business model as well as assembling the various connections between Applied Digital and B. Riley into a cogent picture. First, on July 6, 2023, market analysts Wolfpack Research ("Wolfpack") and The Bear Cave ("Bear Cave") published short reports on Applied Digital. The Wolfpack report raised questions about the viability of the Company's business model, stating, for example, that the Company "pumped up its stock in May by claiming to pivot from a floundering business hosting bitcoin miners, to becoming a low-cost AI Cloud service provider," and "[t]he explosion of interest in AI after the emergence of Chat GPT has predictably attracted the worst promoters []to peddle fake AI wares to credulous investors, and our analysis indicates that APLD is one of these grifters because it is not an AI company[.]" The Bear Cave report, for its part, detailed Applied Digital's problematic corporate history, alleging that "Applied Digital relies on puffery over substance and is a perfect case study on our market's bizarre underbelly of reverse mergers, microcaps, and shell companies."

Following publication of the Wolfpack and Bear Cave short reports, Applied Digital's stock price fell $1.27 per share, or 14.16%, to close at $7.70 per share on July 6, 2023.

Finally, on July 26, 2023, The Friendly Bear published a short report on Applied Digital. The Friendly Bear report expressed the view that B. Riley "is controlling managerial decisions at Applied Digital to the detriment of Applied Digital shareholders"; that Applied Digital's board does not "meet[] the independence requirements under Nasdaq rules and . . . is essentially controlled by B. Riley." The Friendly Bear report also alleged that clear conflicts of interest undermined the Company's purported investigation into sexual harassment claims made against Defendant Cummins the previous month, noting that the manner in which the claims were summarily dismissed by Applied Digital's Audit Committee could subject Applied Digital to "significant legal blowback."

Following publication of the Friendly Bear Report, Applied Digital's stock price fell $0.60 per share, or 6%, over the following two trading sessions, to close at $9.40 per share on July 28, 2023.

The court-appointed lead plaintiff is the investor with the largest financial interest in the relief sought by the class who is adequate and typical of class members who directs and oversees the litigation on behalf of the putative class. Any member of the putative class may move the Court to serve as lead plaintiff through counsel of their choice, or may choose to do nothing and remain an absent class member. Your ability to share in any recovery is not affected by the decision to serve as a lead plaintiff or not.

Faruqi & Faruqi, LLP also encourages anyone with information regarding Applied Digital's conduct to contact the firm, including whistleblowers, former employees, shareholders and others.

Attorney Advertising. The law firm responsible for this advertisement is Faruqi & Faruqi, LLP ( Prior results do not guarantee or predict a similar outcome with respect to any future matter. We welcome the opportunity to discuss your particular case. All communications will be treated in a confidential manner.

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