| Debt | Debt Long-term debt consisted of the following components (in thousands): Interest Rate Maturity Date August 31, 2024 May 31, 2024 CIM Promissory Loan (1) 12% June 2027 105,000 — Starion Ellendale Loan (2) 7.48% February 2028 15,214 16,145 Vantage Transformer Loan 6.50% February 2029 — 3,609 Cornerstone Bank Loan (3) 8.59% March 2029 14,923 15,576 Yorkville Convertible Debt —% April and June 2025 — 80,243 Starion Term Loan (4) 6.50% July 2027 9,298 10,021 Other long-term debt (5) 12,285 297 Deferred financing costs, net of amortization (43,601) (501) Less: Current portion of debt (6,892) (45,918) Long-term debt, net $ 106,227 $ 79,472 (1) Pursuant to a parent guarantee, the CIM Promissory Loan is guaranteed by the Company, and is secured by a continuing security interest in substantially all of its respective assets except for Excluded Assets (as defined in the Guarantee and Collateral 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 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. (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. (5) Inclusive in this number is $12.0 million of proceeds from the issuance of two SAFE agreements which were accounted for as liabilities. See further discussion below. Remaining Principal Payments Below is a summary of the remaining principal payments due over the life of the term loans as of August 31, 2024 (in thousands): Remainder of FY25 $ 7,296 FY26 10,454 FY27 11,134 FY28 112,659 FY29 3,176 Thereafter (1) 12,000 Total $ 156,719 (1) Represents $12.0 million of proceeds from the issuance of two SAFE agreements which were accounted for as liabilities. See further discussion below. Letters of Credit As of August 31, 2024, the Company had letters of credit totaling $28.3 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. The Company presents all restricted cash amounts with letter of credit terms of 12 months or less within the Restricted Cash caption within current assets and any amounts with related letter of credit terms of over 12 months in Other Assets. Yorkville Convertible Debt During the fiscal year ended May 31, 2024, the Company entered into two prepaid advance agreements with YA II PN, LTD. (“YA Fund”) for promissory notes totaling $92.1 million (“YA Notes”). The YA Notes are convertible into shares of the Company’s common stock. During the three months ended August 31, 2024, $48 million of the YA notes were converted into approximately 11.4 million shares of common stock. See “Note 14 - Subsequent Events” for discussion about conversions subsequent to August 31, 2024. The Company has elected to present the Yorkville Convertible Debt at fair value on the unaudited condensed consolidated balance sheets (see "Note 9 - Fair Value Measurements" for further discussion). CIM Arrangement & Warrants During the three months ended August 31, 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 and includes an accordion feature that allows for up to an additional $75 million of borrowings. As of August 31, 2024, the total balance outstanding under the CIM Promissory Note was $105 million. 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 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 CIM Warrants was based on the following significant inputs: Initial Warrants Additional Warrants Warrant issue date June 17, 2024 August 11, 2024 Contractual term 5 years 5 years Volatility 105 % 110 % Risk-free rate 4.25 % 3.76 % Dividend yield — % — % The fair value of the Initial Warrants and Additional Warrants was $4.36 and $3.04 per warrant, respectively. The total fair value of the CIM Warrants was $36.5 million and was recorded in the unaudited condensed consolidated statement of stockholders' equity. The Company deferred the recognition of the fair value of the Initial and Additional Warrants as a reduction in the net carrying amount of the CIM Promissory Note and subsequently will amortize this balance in interest expense using the effective interest rate method. Yorkville Amendment 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 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. 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. SAFE During the three months ended August 31, 2024, 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”). Under the terms of the SAFE agreements, the Investor has the right to certain shares of ADCC’s preferred stock. If an equity financing transaction occurs before the termination of the SAFE agreements, the SAFE agreements will automatically convert into the number of shares of preferred stock equal to the purchase amount divided by the discount price, which will be the lowest price per share of the preferred stock sold in the equity financing transaction multiplied by the discount rate (90%). If there is a liquidity event before the termination of the SAFE agreements, the Investor will automatically be entitled to receive a portion of proceeds, due and payable to the Investor immediately prior to, or concurrent with, the occurrence of such liquidity event, equal to the greater of (i) the purchase amount or (ii) the amount payable on the number of shares of common stock equal to the purchase amount divided by the liquidity price (the price per share equal to the fair market value of the common stock at the time of the liquidity event, as determined by reference to the purchase price payable in connection with such liquidity event, multiplied by the discount rate). If there is a dissolution event before the termination of the SAFE agreements, the Investor will automatically be entitled to receive a portion of proceeds equal to the purchase amount, due and payable to the Investor immediately prior to the occurrence of the dissolution event. In a liquidity or dissolution event, the SAFE agreements are intended to operate like standard non-participating preferred stock. The Investor’s right to receive the purchase amount is junior to payments for outstanding indebtedness and creditor claims, on par with payments for other SAFE agreements and preferred stock, and senior to payments for common stock. The SAFE agreements will automatically terminate immediately following the earliest to occur of: (i) the issuance of capital stock to the Investor pursuant to the automatic conversion of the SAFE agreements; or (ii) the payment, or setting aside for payment, of amounts due the Investor. The Investor shall have the right, but not the obligation, to purchase up to its Pro Rata Share (the ratio of (i) the purchase amount of the SAFE agreements to (ii) the aggregate purchase amounts of all SAFE agreements issued by ADCC prior to the equity financing transaction) of the securities issued in the equity financing transaction, on the same terms, conditions and pricing afforded to the other investors participating in the equity financing transaction. |
