GridAI Technologies has advanced another $1.5 million to Pronghorn Resources, bringing its total lending to the company to $5 million. The latest advance is reflected in a new secured convertible note, which is backed by Pronghorn’s assets and gives GridAI additional remedies if Pronghorn defaults.
The note is due by December 31, 2026, or earlier if Pronghorn completes a change-of-control transaction. Its conversion feature is tied to default, rather than being a routine option to exchange the debt for equity.
Key details
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The total loan is now $5 million. GridAI made an initial $2 million advance on July 17, followed by advances of $964,000 on September 4, $536,000 on October 1 and $1.5 million on October 22. The latest note consolidates those advances.
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Repayment is due at the earlier of two events: December 31, 2026, or the completion of a change-of-control transaction involving Pronghorn.
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Interest begins after the maturity date. The note provides for 7% annual interest on the defined payment amount from and after maturity, payable in cash.
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GridAI has remedies if Pronghorn defaults. Events of default include failure to pay principal or interest when due, certain uncured covenant breaches and defaults under related transaction documents. Interest and other amounts generally have a five-day cure period.
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After an uncured default, GridAI can elect to demand cash repayment or convert the amount owed into equity. The conversion would give GridAI membership interests equal to 10% of Pronghorn’s fully diluted capitalization as of the conversion date.
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The loan remains secured by Pronghorn’s assets. The companies amended their security agreement to cover the new note; the existing security agreement otherwise remains in effect. The note also restricts Pronghorn from taking on debt or granting liens except as permitted under its terms.
Plain-English implications
GridAI’s exposure to Pronghorn has grown to $5 million, with repayment tied to a near-term deadline or a change of control. The debt is secured, and an uncured default could give GridAI a choice between cash repayment and a 10% fully diluted ownership stake in Pronghorn.