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CONVERTIBLE NOTES | 6 Months Ended
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Jun. 30, 2023
Convertible Notes |
CONVERTIBLE NOTES | 19. CONVERTIBLE NOTES Convertible notes payable at June 30, 2023 and December 31, 2022, were comprised of the following:
Schedule of convertible notes payable |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  | Conversion price per share |  | Interest rate |  |  | Due date |  | June 30, 2023 |  |  | December 31, 2022 |
Convertible promissory note |  | $4.00 |  |  | 4% |  |  | May 10, 2024 |  | $ | 300,000 |  |  | $ | 660,000 |
AVLP convertible promissory notes |  | $0.35 (AVLP stock) |  |  | 7% |  |  | August 22, 2025 |  |  | 9,911,000 |  |  |  | 9,911,000 |
GIGA senior secured convertible notes - in default |  | $0.25 (GIGA stock) |  |  | 18% |  |  | October 11, 2023 |  |  | 2,317,000 |  |  |  | - |
BMI senior secured convertible notes |  | $3.28 (BMI stock) |  |  | OID Only |  |  | April 27, 2024 |  |  | 6,875,000 |  |  |  | - |
Fair value of embedded conversion options |  |  |  |  |  |  |  |  |  |  | 2,577,000 |  |  |  | 2,316,000 |
Total convertible notes payable |  |  |  |  |  |  |  |  |  | $ | 21,980,000 |  |  | $ | 12,887,000 |
Less: unamortized debt discounts |  |  |  |  |  |  |  |  |  |  | (6,705,000 | ) |  |  | (111,000 | )
Total convertible notes payable, net of financing cost, long term |  |  |  |  |  |  |  |  |  | $ | 15,275,000 |  |  | $ | 12,776,000 |
Less: current portion |  |  |  |  |  |  |  |  |  |  | (3,326,000 | ) |  |  | (1,325,000 | )
Convertible notes payable, net of financing cost – long-term portion |  |  |  |  |  |  |  |  |  | $ | 11,949,000 |  |  | $ | 11,451,000 |
The contractual maturities of the Company’s convertible notes payable, assuming the exercise of all extensions that are exercisable solely at the Company’s option, as of June 30, 2023 were:
Schedule of contractual maturities |  |  |  |
Year |  | Principal |
2023 |  | $ | 2,317,000 |
2024 |  |  | 7,175,000 |
2025 |  |  | 12,488,000 |
|  | $ | 21,980,000 |
Significant inputs associated with the AVLP embedded conversion option include:
Schedule of weighted average assumptions |  |  |  |  |  |  |  |
|  | June 30, 2023 |  |  | December 31, 2022 |
Exercise price |  |  | Variable |  |  |  | Variable |
Contractual term in years |  |  | 2.2 |  |  |  | 2.7 |
Volatility |  |  | 75 | % |  |  | 82 | %
Dividend yield |  |  | 0 | % |  |  | 0 | %
Risk-free interest rate |  |  | 4.2 | % |  |  | 4.0 | %
BMI Senior Secured Convertible Notes On April 27, 2023, BMI sold $6.9 million of principal face amount senior secured convertible notes with an original issue discount to sophisticated investors for net proceeds to BMI of $5.5 million. The notes mature on April 27, 2024 and are secured by all of the assets of BMI and certain of its subsidiaries. There is no stated interest rate on the convertible note unless there is an event of default. The notes are convertible into shares of BMI common stock at $3.28; however there are provision in the convertible note that enables the holders of the notes to receive a lower conversion rate upon future common stock issuances by BMI that fall below the $3.28 price. As BMI does not have sufficient authorized shares to fulfill the conversion option, the conversion option meets the criteria of a derivative instrument, and the convertible note has been discounted $4.1 million for the fair value of the warrant derivative liability and $1.4 million for the fair value of the embedded conversion option derivative liability at inception. The fair value of the warrant derivative liability is updated quarterly and is recorded within financial instrument liabilities, a component of accounts payable and accrued liabilities and the fair value of the embedded conversion option derivative liability is updated quarterly and is recorded within convertible notes. In addition, BMI has recorded $1.4 million in original issue discount, which is being amortized over the interest method for the term of the BMI senior secured convertible notes. Amortization of discount related to the senior secured convertible notes was $0.2 million for the three months ended June 30, 2023. Activity related to the embedded conversion option derivative liability for the three months ended June 30, 2023 is as follows:
Schedule of option derivative liability |  |  |  |
April 27, 2023 issuances of convertible note – derivative liability |  | $ | 1,352,000 |
Change in fair value of convertible note derivative liability |  |  | (1,029,000 | )
Ending balance as of June 30, 2023 |  | $ | 323,000 |
Significant Level 3 inputs associated with the BMI embedded conversion option include:
Schedule of assumptions |  |  |  |  |  |  |
|  |  | June 30, 2023 |  |  | Inception |
Contractual term in years |  |  | 0.8 |  |  | 1.0 |
Volatility |  |  | 113% |  |  | 111% |
Dividend yield |  |  | 0% |  |  | 0% |
Risk-free interest rate |  |  | 3.8% |  |  | 3.5% |

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