DEFERRED VARIABLE PAYMENT OBLIGATION

9 Months Ended

Nov. 30, 2019

Deferred Variable Payment Obligation

DEFERRED VARIABLE PAYMENT OBLIGATION

10. DEFERRED VARIABLE PAYMENT OBLIGATION 

On February 1, 2019 the Company entered into an agreement with an investor whereby the investor would pay up to $900,000 (including $192,500 paid in January and February 2019) in exchange for a perpetual 9% rate payment (Payments) on the Company’s reported quarterly revenue from operations excluding any gains or losses from financial instruments (Revenues). If the total investor advances turns out to be less than $900,000, this would not constitute a breach of the agreement, rather the 9% rate would be adjusted on a pro-rata basis. The investor has agreed to pay the remaining balance in minimum $60,000 monthly installments, concluding November 30, 2019. At November 30, 2019 the investor has advanced the full $900,000.

On May 9, 2019 the Company entered into two similar arrangements with two investors: 

(1)

The investor would pay up to $400,000 (including $143,556 paid in May 2019) in exchange for a perpetual 4% rate Payment on the Company’s reported quarterly Revenues. If the total investor advances turns out to be less than $400,000, this would not constitute a breach of the agreement, rather the 4% rate would be adjusted on a pro-rata basis. The investor has agreed to pay the remaining balance in four monthly installments of $64,111 starting July 1, 2019. At November 30, 2019, $400,000 has been paid to the Company.

(2)

The investor would pay up to $50,000 (including $17,444 paid in May 2019) in exchange for a perpetual 1.11% rate Payment on the Company’s reported quarterly Revenues. If the total investor advances turns out to be less than $50,000, this would not constitute a breach of the agreement, rather the 1.11% rate would be adjusted on a pro-rata basis. The investor has agreed to pay the remaining balance in four monthly installments of $8,014 starting July 1, 2019. At November 30, 2019, $50,000 has been paid to the Company.

These variable payments (Payments) are to be made 30 days after the fiscal quarter. If the Payments would deplete RAD’s available cash by more than 30%, the Payments may be deferred for up to 12 months after the quarterly report at an interest rate of 6% per annum on the unpaid amount. 

In the event that at least 10% of the assets of the Company are sold by the Company, the investors would be entitled to the fair market value (FMV) of all future Payments associated with the assets sold as determined by an independent valuator to be chosen by the investors. The FMV cannot exceed 30% of the total asset disposition price defined as the total price paid for the assets plus all future Payments associated with the assets sold. In the event that the common or preferred shares are sold by the Company to a third party as to effect a change in control, then the investors must be paid the FMV of all future Payments in one lump payment. The FMV cannot exceed 30% of the share disposition price defined as the total price the third party paid for the shares plus the total value of all future Payments. 

The Payments will first become payable on June 30, 2019 based on the quarterly Revenues for the quarter ended May 31, 2019 and will accrue every quarter thereafter. As of November 30 , 2019, the Company has accrued approximately $20,000 in Payments. No amounts have been recorded to date as interest, as the amounts are immaterial. 

On November 18, 2019 the Company entered into another similar arrangement with one of the investors whereby the investor would advance up to $225,000  in exchange for a perpetual 2.25% rate Payment on the Company’s quarterly Revenues. At November 30, 2019 the investor has advanced $40,000 with a commitment to advance another $60,000 by January 30, 2020 for a minimum advance  of $100,000, with the remainder to be advanced no later than April 30, 2020. If the total investor advances turns out to be less than $225,000, this would not constitute a breach of the agreement, rather the 2.25% rate would be adjusted on a pro-rata basis. 

The Company retains total involvement in the generation of cash flows from these revenue streams that form the basis of the payments to be made to the investors under this agreement. Because of this, the Company has determined that the agreements constitute debt agreements. As of November 30, 2019, the Company has not yet completed its assessment of the likely cash flows under these agreements, and thus, has not yet determined the effective interest rate under these agreements. The Company expects to have completed its analysis of the expected cash flows prior to the filing of the year end February 28, 20120 filing. As of November 30, 2019, and February 28, 2019, the balances under these agreements were $1,390,000 and $192,500, respectively. 

For the nine months ended November 30, 2019 , $1,197,500 has been paid to the Company bringing the balance to $1,390,000 at November 30, 2019. All investors’ commitments are fully funded.