Dallas-based Applied Digital Corp. (NASDAQ:APLD) has issued a warrant for the purchase of up to 6,300,449 shares of its common stock, as part of a financing agreement with CIM APLD Lender Holdings, LLC. The transaction was detailed in a Form 8-K filed with the Securities and Exchange Commission today.
The warrant issuance follows a previously disclosed promissory note dated June 7, 2024, between APLD Holdings 2 LLC, a subsidiary of Applied Digital, and CIM, which provided for an initial borrowing of $15 million. This initial amount was drawn on the same day. The agreement includes the potential for subsequent borrowings up to $110 million, contingent on certain conditions being met. Additionally, the promissory note features an "accordion" provision that could allow for another $75 million in borrowings, subject to mutual consent.
The shares associated with the warrant were offered through a shelf registration statement on Form S-3, filed on May 6, 2024, and declared effective on May 16, 2024. This includes a base prospectus and a prospectus supplement filed on the date of the warrant issue.
The terms of the Registered Warrant had been previously reported in the company's Current Report on Form 8-K filed on June 7, 2024, with an amendment on June 10, 2024. The Registered Warrant is exercisable for shares of the company's common stock at a par value of $0.001 per share.
Legal opinions regarding the validity of the share issuance and the enforceability of the Registered Warrant were provided by Snell & Wilmer LLP and Milbank LLP, respectively. These opinions are included as exhibits to the Form 8-K.
This financial maneuver is part of Applied Digital's broader strategy as it operates within the computer processing and data preparation sector under the SIC code 7374. The company, formerly known as Applied Blockchain, Inc., and before that as Applied Science Products, Inc., and Flight Safety Technologies Inc., has undergone several name changes, with the most recent occurring on April 23, 2021.
"In other recent news, Applied Digital reported a net loss of $62.8 million and revenues of $43.3 million for the fiscal third quarter. The company has also secured a $125 million financing commitment from CIM Group for its High-Performance Computing (HPC) Campus in Ellendale, North Dakota, which could potentially increase to $200 million upon mutual agreement. In a separate development, Applied Digital issued a $42.1 million convertible debenture in a private financing agreement. These are recent financial strides by the company despite operational challenges.
Needham has maintained its Buy rating on Applied Digital, endorsing the company as a top pick for AI/HPC infrastructure. The firm highlighted Applied Digital's operational advantages and its construction of a 100MW HPC site in North Dakota, with a letter of intent for an additional 400MW with a U.S. hyperscaler customer.
In leadership news, Applied Digital appointed Todd Gale as its new Chief Development Officer and added Ella Benson as an independent director to its Board of Directors. These appointments signal the company's commitment to advancing its HPC data center and diversifying its customer base. These are some of the recent developments at Applied Digital."
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