| Convertible Promissory Notes | 11. Convertible Promissory Notes Transactions related to GR Unlimited’s convertible promissory notes during the year ended October 31, 2019, include the following:
Schedule of convertible promissory note
Face Carrying Interest
Balance - October 31, 2018 $ 1,343,171 $ 1,299,376 $ 454,775
Amortization of deferred financing costs 22,106 23,759 -
Interest expense on long-term debt Interest accretion - - 2,154
Interest accretion - 5,502 -
Repaid (265,277 ) (265,277 ) (137,889 )
Converted to common units (1,100,000 ) (1,063,360 ) (279,040 )
Balance - October 31, 2019 $ - $ - $ 40,000
Less: current portion - - 40,000
Balance - net of current portion $ - $ - $ - Transactions related to GR Unlimited’s convertible promissory notes during the period ended October 31, 2018, include the following:
Face Carrying Interest
Balance - October 31, 2017 $ 1,518,391 $ 1,394,582 $ 140,118
50% - November 7, 2017 (i) 300,000 300,000 -
50% - November 14, 2017 (ii) 190,000 190,000 -
50% - November 14, 2017 (ii) 125,000 125,000 -
50% - November 14, 2017 (ii) 90,000 90,000 -
50% - November 14, 2017 (ii) 25,000 25,000 -
50% - November 14, 2017 (ii) 70,000 70,000 -
50% - November 14, 2017 (ii) 25,000 25,000 -
50% - November 14, 2017 (ii) 25,000 25,000 -
25% - December 15, 2017 (iii) 1,000,000 1,000,000 -
12.5% - August 1, 2018 (vii) 57,500 57,500 -
$ 3,425,891 $ 3,302,082 $ 140,118
Deferred financing costs (55,008 ) (55,008 ) -
Amortization of deferred financing costs 52,286 52,286 -
Interest expense on long-term debt - - 822,165
Fair value of conversion option - (298,000 ) -
Interest accretion - 284,042 -
Exchanged (50,000 ) (50,000 ) (7,500 )
Repaid (492,223 ) (492,223 ) (205,678 )
Converted to common units (1,537,775 ) (1,443,803 ) (294,330 )
Balance - October 31, 2018 $ 1,343,171 $ 1,299,376 $ 454,775
Less: current portion $ 265,277 $ 265,277 $ 454,775
Balance - net of current portion $ 1,077,894 $ 1,034,099 $ - During the period ended October 31, 2018, the Company issued the following unsecured convertible promissory notes:
i) Effective November 7, 2017, GR Unlimited entered into an agreement with the Company’s Marketing Consultant (the “Consultant”) whereby the Consultant purchased a convertible promissory note for the total principal of $ 300,000 50 12,500 15,000 At any time prior to the maturity of the agreement, the Consultant has the right to convert all (but not less than all) of the outstanding principal amount and all accrued and unpaid interest into the number of fully paid and non-assessable common units of GR Unlimited at a price per unit equal to the applicable conversion price calculated immediately before the closing of a going public event or qualified transaction. The conversion price represents an amount equal to the applicable conversion valuation divided by the number of units outstanding at the time of conversion. The Conversion valuation represents the following a) $ 15,000,000 18,000,000 300,000
ii) Effective November 14, 2017, GR Unlimited entered into an agreement with certain purchasers (collectively the “Purchasers” and individually the “Purchaser”), to issue a series of notes with substantially similar terms, including maturity, interest rates, and conversion terms. Under the agreements, the Purchasers purchased convertible promissory notes with aggregate principal of $ 550,000
a) Interest will accrue on the outstanding principal at an annual rate of 50
b) Should the Purchasers extend the maturity date due to a Public Event prior to the end of the period, the Purchaser has the right to extend the Maturity date by up to 3 months after the consummation of the Public Event at an annual rate of 0% following the initial period. A Public Event means a transaction or other action that causes GR Unlimited’s membership units or securities for which such membership units are exchanged or substituted, to become publicly traded on a United States or Canadian stock exchange through which GR Unlimited (or its publicly held parent entity) raises aggregate proceeds net of any costs of not less than $5,000,000 (excluding these convertible promissory notes and the principal and accrued interest under any other promissory notes that are convertible into equity securities of GR Unlimited.
c) Should purchasers extend the Maturity Date by 6 months on all but not less than all of the then-outstanding principal; provided, however GR Unlimited shall pay Holder all principal not so extended, and all accrued but unpaid interest at the end of the initial period at an annual rate of 30% calculated on the basis of a year of 365 days.
d) Should the Purchaser extend the maturity date of this note by 18 months on not less than $ 10,000 The notes, which includes any unpaid principal and accrued interest, unless converted in accordance with provisions stated in the agreement shall be due and payable on the earlier of the following: (a) the date on which the initial period ends (the Maturity Date) unless the Maturity Date is extended by Purchaser by 3, 6, or 18 months after the Public Event. The notes may not be prepaid, in whole or in part, prior to the Maturity Date without the prior written consent of a majority of the Purchasers. If at any time prior to the maturity of the notes a qualified equity financing occurs, each Purchaser has the right to convert not less than $10,000 of the outstanding principal amount and all accrued and unpaid interest into the number of fully paid and non-assessable common membership units of GR Unlimited at a price per unit equal to the applicable conversion price. If the Purchaser has extended the maturity date and the qualified equity financing occurs during the 18 months following the initial period, the Purchaser shall have the obligation to convert all of the outstanding principal amount and all accrued and unpaid interest into the number of fully paid and non-assessable common membership until of GR Unlimited at a price per unit equal to the applicable conversion price. The conversion price represents the following:
a) In the event of a qualified equity financing, the lower of (i) the valuation cap divided by issued and outstanding share count immediately prior to the qualified equity financing, or (ii) eighty percent (80%) of the price per unit paid in cash by purchasers of New Units issued in such qualified equity financing; provided, however, that such percentage shall decline by two percent (2%) for each month an event of default occurs and is continuing after the end of the initial period, up to a maximum of ten percent (10%) (e.g., if such an event of default continues for five months, the conversion price under this paragraph (a) will be a price equal to seventy (70%) of the applicable price set forth in clause (ii) above); or
b) In the event of a public event the lower of (i) the valuation cap divided by the issued and outstanding share count immediately prior to the public event, or (ii) eighty percent (80%) of the price per unit paid in cash by purchasers of new units issued in such Public Event; provided, however, that such percentage shall decline by two percent (2%) for each month an event of default occurs and is continuing after the end of the Initial Period, up to a maximum of ten percent (10%) ( e.g.
c) In the event of a change of control transaction, the lower of (i) the valuation cap divided by the change of control issued and outstanding share count immediately prior to the qualified equity financing, or (ii) eighty percent (80%) of the price per unit paid by the purchaser(s) in such change of control transaction; provided, however, that such percentage shall decline by two percent (2%) for each month an event of default occurs and is continuing after the end of the initial period, up to a maximum of ten percent (10%) ( e.g.
d) In the event of a nonqualified equity financing, the lower of (i) the valuation cap divided by Issued and outstanding share count immediately prior to the nonqualified equity financing, or (ii) eighty percent (80%) of the price per unit paid in cash by purchasers of new units issued in such nonqualified equity financing; provided, however, that such percentage shall decline by two percent (2%) for each month an event of default occurs and is continuing after the end of the initial period, up to a maximum of ten percent (10%) (e.g., if such an event of default continues for five months, the conversion price under this paragraph (a) will be a price equal to seventy (70%) of the applicable price set forth in clause (ii) above). During the year ended October 31, 2018, GR Unlimited made aggregate principal repayments of $ 442,223 107,777 127,915
iii) Effective December 15, 2017, GR Unlimited entered into an agreement whereby the holder purchased a convertible promissory note for the total principal of $ 1,000,000 25
a) As at October 31, 2018 interest accrued to $ 105,556 500,000
b) Interest shall accrue from the effective date of the note on the total sum of $ 1,000,000 20,833
c) A one-time additional interest payment equal to 5% of the unpaid principal balance payable concurrent with when the 12 th The note, which includes any unpaid principal and accrued interest, unless converted in accordance with provisions stated in the agreement shall be due and payable on the earlier of the following: (a) 36 months from the effective date of the note; or (b) the occurrence of a change of control of GR Unlimited. Within the first 24 months from the effective date of the note, no prepayment will occur, except for payments of accrued interest or other payments as outlined above. At any time prior to the 24 month anniversary of the effective date of the note, the holder has the right to fully or partially convert the outstanding principal and all accrued and unpaid interest into the number of fully paid and non-assessable common membership units of GR Unlimited at a price per unit equal to the applicable conversion price. The Conversion price represents an amount equal to the applicable conversion valuation divided by the number of issued and outstanding units of GR Unlimited at the time of conversion calculated immediately before the closing of a qualified equity financing event if the conversion is in conjunction with a qualified equity financing event. If GR Unlimited consummates a going public event within the 12 months anniversary date of the note, the holder has the right to fully or partially convert the total principal outstanding at a price per unit equal to the applicable conversion price by providing written notice to GR Unlimited of its election to convert within 7 days after receipt from GR Unlimited of the financing notice. If the holder so converts, GR Unlimited will offer the holder a position as a strategic advisor to GR Unlimited for a 12 month term, which commences on the date of conversion. The holder will receive gross monthly compensation equal to $ 10,000 The conversion valuation represents the following a) $20,000,000 if the holder converts the note within 12 months of the effective date of the note and b) $40,000,000 if the holder converts the note after 12 months of the effective date of the note, but before 24 months of the effective date of the note. As at October 31, 2018, accrued interest of $ 248,958 During the period ended October 31, 2017, GR Unlimited issued the following unsecured convertible promissory notes:
iv) Effective February 1, 2017: Principal of $ 100,000 15 26,219
v) Effective February 1, 2017: Principal of $ 100,000 15 22,438 11,209 100,000 $ 20,465
vi) Effective June 1, 2017: GR Unlimited entered into an agreement with its President and CEO and the President and CEO’s spouse (the “Holder”), whereby the Holder purchased a convertible non-negotiable promissory note for total principal of $ 637,775 25 30,000 In the event GR Unlimited completes a qualified equity financing transaction on or before the maturity date of the promissory note, the holder has the right to convert in whole or in part the unpaid principal and interest balance into fully paid non-assessable shares of common stock of GR Unlimited at a price per unit equal to the applicable conversion price calculated immediately before the closing of a going public event or qualified transaction. At any time prior to the maturity of the agreement, the Holder has the right to convert a portion of the outstanding principal amount and all accrued and unpaid interest into the number of fully paid and non-assessable common membership units of GR Unlimited. The conversion price represents an amount equal to the applicable conversion valuation divided by the number of units outstanding at the time of conversion. The Conversion valuation represents the following a) $ 10,000,000 15,000,000 637,775 146,157 922 The fair value of the conversion option was estimated as $54,000 using the following inputs, assumptions and estimates:
Schedule of conversion option
Risk-free interest rate 1.68 %
Expected life 2.6
Expected volatility 70 %
Share price $ 612
Units outstanding at time of conversion 10,000
Conversion price at time of conversion $ 1,000 - $1,500
vii) Effective July 26, 2017, GR Unlimited through its wholly owned subsidiary GRU Properties, LLC entered into an agreement whereby the holder purchased a convertible promissory note for the total principal of $ 100,000 50 140,000 The holder of the convertible promissory note has the unrestricted right, at the holder’s option to convert a maximum of $125,000 of the outstanding balances into common units of GR Unlimited at a price per unit agreed upon by GR Unlimited and the holder, or if a conversion price per unit cannot be agreed upon, the price per unit will be determined by appraisal. The right to convert may be exercised after the extended maturity date of the convertible promissory note. The number of common shares into which the convertible promissory notes may or will be converted shall be determined by dividing the unpaid principal balance, together with all accrued and unpaid interest thereon, by the conversion price. On January 31, 2018, $50,000 of the outstanding principal was repaid and the remaining principal of $50,000 was extended to August 1, 2018. In addition, $7,406 of accrued and unpaid interest was converted into 52.06 common units of GR Unlimited (198,214 common shares of the Company) as described in note 13(xiv). On August 1, 2018, the holder of the convertible promissory note accepted a new convertible promissory note in the amount of $57,500 in exchange for the current note and $7,500 of accrued interest. The new convertible promissory note has a maturity date to August 1, 2019, with interest at 12.5% per annum, payable monthly. During the year ended October 31, 2019, the principal and accrued interest was paid in full. As at October 31, 2018, accrued interest of $1,197 (2017 - $13,185) was incurred. The fair value of the conversion option was estimated as $23,000 using the following inputs, assumptions and estimates:
Schedule of fair value of the conversion option was estimated
Risk-free interest rate 1.36 %
Expected life 0.75
Expected volatility 70 %
Share price $ 612
Conversion price at time of conversion $ 612 During the year ended October 31, 2019, the Company derecognized the corresponding derivative liability resulting in a gain on derecognition of $39,500 included in the statement of loss and comprehensive loss.
viii) Effective July 26, 2017, GR Unlimited through its wholly owned subsidiary GRU Properties, LLC entered into an agreement whereby the holder purchased a convertible promissory note for the total principal of $ 100,000 50 140,000 The holder of the convertible promissory note has the unrestricted right, at the holder’s option to convert a maximum of $125,000 of the outstanding balances into common units of the GR Unlimited at a price per unit agreed upon by GR Unlimited and the holder, or if a conversion price per unit cannot be agreed upon, the price per unit will be determined by appraisal. The right to convert may be exercised after the extended maturity date of the convertible promissory note. The number of common shares into which the convertible promissory notes may or will be converted shall be determined by dividing the unpaid principal balance, together with all accrued and unpaid interest thereon, by the conversion price. As at October 31, 2017, accrued interest of $13,185 was incurred. On January 31, 2018, the principle of $100,000 and unpaid interest of $50,000 were converted into 89.8 common units of GR Unlimited (462,500 common shares of the Company) as described in note 13(v). The fair value of the conversion option was estimated as $23,000 using the following inputs, assumptions and estimates:
Schedule of unrestricted conversion option
Risk-free interest rate 1.36 %
Expected life 0.75
Expected volatility 70 %
Share price $ 612
Conversion price at time of conversion $ 612
ix) Effective July 26, 2017: Principal of $ 100,000 50 13,185 25,000 The fair value of the conversion option was estimated as $15,000 using the following inputs, assumptions and estimates:
Schedule of simple interest conversion option
Risk-free interest rate 1.15 %
Expected life 0.25
Expected volatility 60 %
Share price $ 612
Conversion price at time of conversion $ 612
x) Effective October 1, 2017: GR Unlimited entered into an agreement with its President and CEO and the President and CEO’s spouse (the “Holder”), whereby the Holder purchased two convertible non-negotiable promissory notes for total principal of $ 250,000 50 $ 15,000 46,250 At any time prior to the maturity of the agreement, the Holder had the right to convert a portion of the outstanding principal amount and all accrued and unpaid interest into the number of fully paid and non-assessable common membership units of GR Unlimited at a price per unit equal to the applicable conversion price calculated immediately before the closing of a going public event or qualified transaction. The conversion price represents an amount equal to the applicable conversion valuation divided by the number of units outstanding at the time of conversion. The Conversion valuation represents the following a) $10,000,000 if the holder converts the note within 6 months of the effective date of the note and b) $15,000,000 if the holder converts the note after 6 months of the effective date of the note, but prior to the note’s maturity. As at October 31, 2017, accrued interest of $10,274 was incurred. The fair value of the conversion option was estimated as $8,000 using the following inputs, assumptions and estimates:
Schedule of valuation divided conversion option
Risk-free interest rate 1.41 %
Expected life 0.92
Expected volatility 70 %
Share price $ 612
Units outstanding at time of conversion 10,000
Conversion price at time of conversion $ 1,000 - $1,500
xi) Effective October 20, 2017, Principal of $ 100,000 50 40,000 The fair value of the conversion option was estimated as $23,000 using the following inputs, assumptions and estimates:
Schedule of simple interest accrued conversion option
Risk-free interest rate 1.27 %
Expected life 0.47
Expected volatility 70 %
Share price $ 612
Conversion price at time of conversion $ 612
xii) On October 23, 2017, Principal of $ 50,000 50 548 The fair value of the conversion option was estimated as $11,000 using the following inputs, assumptions and estimates:
Schedule of simple interest accrued one conversion option
Risk-free interest rate 1.27 %
Expected life 0.48
Expected volatility 70 %
Share price $ 612
Conversion price at time of conversion $ 612 |
