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Related Party Transactions
 12 Months Ended
May 31, 2024
Related Party Transactions [Abstract]  
Related Party Transactions Related Party Transactions
Related Party Revenue
The following table illustrates related party revenue for the fiscal years ended May 31, 2024 and May 31, 2023 (in thousands):
May 31, 2024May 31, 2023
Customer D*$8,005 $8,007 
Customer E**$6,756 $6,401 
*Customer D is a subsidiary of an entity which is deemed to beneficially own over 5% of the Company's outstanding common stock.
**Customer E is 60% owned by an individual who is deemed to beneficially own over 5% of the Company's outstanding common stock. As of July 25, 2024, the individual filed a Schedule 13G to report the fact that as of the date thereof, the individual has ceased to be a beneficial owner of more than 5% of such class of securities. However, during fiscal year 2024, as more than 5% of the Company's outstanding common stock was held by the individual, the transactions were therefore considered related party transactions.
The following table illustrates related party deferred revenue and deposits balances as of May 31, 2024 and May 31, 2023 (in thousands):
Customer D balances as ofCustomer E balances as of
May 31, 2024May 31, 2023May 31, 2024May 31, 2023
Deferred revenue$993 $1,474 $699 $50 
Customer Deposits$895 $2,450 $654 $1,360 
Related Party Sublease Income
The Company receives sublease income from B. Riley Asset Management, which is also a wholly-owned subsidiary of B. Riley Financial, Inc. As previously disclosed, the Company’s Chairman and Chief Executive Officer, served as the President of B. Riley Asset Management, and effective February 5, 2024, resigned from that position. Sublease income is included in selling, general and administrative expenses in our consolidated statements of operations. The following table illustrates related party sublease income for the fiscal years ended May 31, 2024 and May 31, 2023 (in thousands):
May 31, 2024May 31, 2023
Sublease Income$70 $103 
B. Riley Loan
On May 23, 2023, Sai Computing LLC, a wholly-owned subsidiary of the Company, entered into a Loan and Security Agreement (the "B. Riley Loan and Security Agreement") with B. Riley Commercial Capital, LLC and B. Riley Securities, with the Company as Guarantor. The B. Riley Loan and Security Agreement provides for a term loan of up to $50 million in the principal with an interest rate of 9.00% per annum (the "B. Riley Loan"). The proceeds of the B. Riley Loan were used to help fund the buildout of the Company’s Cloud Services Business and data centers, and for general corporate purposes and working capital.
During the fiscal year ended May 31, 2024, the Company borrowed an additional $8.0 million and early repaid the total outstanding balance of $44.5 million. Interest expense and deferred issuance cost amortization associated with the loan was $0.7 million for the fiscal year ended May 31, 2024. The Company recognized a $2.5 million loss on debt extinguishment associated with the early repayment of the outstanding balance for the fiscal year ended May 31, 2024.
On February 5, 2024, the Company entered into a Termination of Loan and Security Letter (the “Termination Letter”) with B. Riley Commercial Capital, LLC and B. Riley Securities, Inc. which terminated the Loan and Security Agreement dated as of May 23, 2023, as amended, among the parties. At the time of the Termination Letter, all principal, interest and fees under the B. Riley Loan and Security Agreement had been paid in full. No early termination penalty was paid in connection with the Termination of Loan and Security letter.
AI Bridge Loan
On January 30, 2024, the Company issued an Unsecured Promissory Note (the “AI Bridge Loan”) payable to AI Bridge Funding LLC (the “Lender”), providing for an unsecured loan in the aggregate principal amount of up to $20.0 million. The Company elected to recognize the entire note at fair value under ASC 815, Derivatives and Hedging. During the fiscal year ended May 31, 2024, the Company recognized a total of $13.8 million loss on change in fair value of debt related to the AI Bridge Loan which is included in our consolidated statements of operations.
During the fiscal fourth quarter 2024, the principal balance of the note, $20.0 million as of May 1, 2024, was converted into common stock pursuant to the terms of the AI Bridge Loan resulting in the Company issuing 8,421,146 in shares of its common stock to the Lender. Accordingly, the AI Bridge Loan and the reserve of shares for issuance thereunder have been extinguished. See Note 9 - Stockholders' Equity for further discussion on the Company’s fair value considerations of the warrants issued. Pursuant to the terms of the AI Bridge Loan, the Company is obligated to pay to the Lender a repayment fee in an amount sufficient for the Lender to receive an aggregate amount equal to 1.25x the aggregate principal amount funded as loans by the Lender to the Company. As such, the Company recorded a total of $5.0 million in interest expense related to the AI Bridge Loan during the fiscal year ended May 31, 2024.
Affiliates of the Lender are both an investor in B. Riley Financial, Inc. and also an investment management client of B. Riley Asset Management. As previously disclosed, the Company’s Chairman and Chief Executive Officer, served as the President of B. Riley Asset Management, and effective February 5, 2024, resigned from that position.
Other Related Party Transactions
Related party transactions included within selling, general, and administrative expense on the consolidated statement of operations during the fiscal years ended May 31, 2024 and 2023 include the following:
•construction and consulting costs of $0.3 million and $0.1 million, respectively, to a company owned by a family member of the Company’s Chief Financial Officer.
•software license fees of $0.2 million and $0.1 million, respectively, to a company whose chairman is also a member of the Company’s Board of Directors.
•consulting fees of $43,000 to a Board of Director member for sales consulting work. No such expenses were incurred during the fiscal year ended May 31, 2023.