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CONVERTIBLE NOTE RECEIVABLE, COMMON STOCK AND WARRANTS IN UNIGEN POWER, INC.
 12 Months Ended
Jan. 31, 2025
Convertible Note Receivable Common Stock And Warrants In Unigen Power Inc.  
CONVERTIBLE NOTE RECEIVABLE, COMMON STOCK AND WARRANTS IN UNIGEN POWER, INC.

7. CONVERTIBLE NOTE RECEIVABLE, COMMON STOCK AND WARRANTS IN UNIGEN POWER, INC.

 

On December 16, 2019, the Trust entered into a Convertible Debenture Purchase Agreement with UniGen Power Inc. (“UniGen”).

 

The Trust purchased secured convertible debentures (“Debentures”) in the aggregate amount of $1,000,000 (the “Loan Amount”) at an annual interest rate of 6% (approximately $15,000 per quarter). The Debentures are convertible into 1,000,000 Class A shares of UniGen Common Stock at an initial conversion rate of $1.00 per share.

 

UniGen issued the Trust common stock purchase warrants (the “Debenture Warrants”) to purchase up to 1,000,000 shares of Class A Common Stock. The Debenture Warrants are exercisable at an exercise price of $1.00 per share of Class A Common Stock.

 

UniGen also issued the Trust additional common stock purchase warrants (“Additional Warrants”) to purchase up to 500,000 shares of UniGen Class A Common Stock. The Additional Warrants are exercisable at an exercise price of $2.25 per share of Class A Common Stock.

 

The total of all stock ownership upon conversion of the note receivable is 1 million shares and if all stock warrants are exercised, shares from conversion of the note receivable and shares from the exercise of warrants could total approximately 2 million UniGen shares, which amounts up to approximately 15-20% of fully diluted UniGen equity.

 

Certain stock option warrants have expired, but may be extended to secure additional funds as part of the current UniGen effort to raise additional capital, and complete the first two prototypes.

 

On the Trust’s balance sheet, the investment of the $1,000,000 consists of approximately $700,000 in note receivables and approximately $300,000 as the fair value of the warrant issued with the Trust’s investment in UniGen. The value of the premium related to the fair value of the warrants will accrete over the life of the debentures.

 

The value of the warrants issued with the note receivable was based on Black-Scholes pricing model based on the following inputs:

 

Debenture Warrants

 

Type of option  Call option 
Stock price  $2.25 
Exercise (Strike) price  $1.00 
Time to maturity (years)   2.0 
Annualized risk-free rate   1.630%
Annualized volatility   27.43%

  

 

Additional Warrants

 

Type of option  Call option 
Stock price  $2.25 
Exercise (Strike) price  $2.25 
Time to maturity (years)   3.0 
Annualized risk-free rate   1.630%
Annualized volatility   27.43%

 

If all notes are converted and all available but not outstanding warrants exercised, IHT could hold up to approximately 15-20% of UniGen fully diluted equity ownership.

 

During the year ended January 31, 2025, the Trust reinvested $35,000 of interest income to exercise 35,000 warrants for 35,000 shares of common stock in UniGen. These warrants were exercised entirely in the First Fiscal Quarter of 2025, during the three months ended April 30, 2024.

 

During the Second Fiscal Quarter (May 1, 2024 to July 31, 2024), three months ended July 31, 2024, as well as the Third Fiscal Quarter (August 1, 2024 to October 31, 2024), three months ended October 31, 2024, and Third Fiscal Quarter (November 1, 2024 to January 31, 2025), the Trust did not receive any interest income from UniGen.

 

As of January 31, 2025, IHT held 575,000 common shares of UniGen, purchased at a cost of $668,750. Management believes recording the investment at cost approximates fair value since there have been no significant changes in the operations of UniGen and UniGen’s projects are still in the developmental R&D phase.

 

UniGen Power Inc. (UPI), progress of the UPI efficient clean energy innovation is as follows:

 

1. UniGen has stated they have completed 61% of engineering, and is now focused on raising additional capital, which is an ongoing process. IHT may participate, at a future date.

 

2. Due to an increasingly unreliable American power grid, increasing demand for electric vehicles, increasing demand for data center power, Artificial Intelligence electricity demand, inflation, and supply chain pressures, the UniGen marketing team estimates product’s market has grown. The market for total electricity in the U.S. is projected to double over the next five years. UniGen previously increased the MSP planned power plant price. The initial order for thirty units has been reaffirmed.

 

James Wirth (President) and Marc Berg (Executive Vice President) both lack significant control. They hold two of the five Board of Directors seats or 40% and were elected in December 2019 to serve on the board of UniGen. This product is a potentially power industry disruptive relatively clean energy generation innovation.

 

The Trust has valued UniGen investment as a level 3 fair value measurement, for the following reasons: The investment does not qualify for level 1 since there are no identical actively traded instruments or level 2 identical or similar unobservable markets.