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CONVERTIBLE NOTES | 6 Months Ended
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Jun. 30, 2024
Convertible Notes |
CONVERTIBLE NOTES | 21. CONVERTIBLE NOTES Convertible notes payable at June 30, 2024 and December 31, 2023, were comprised of the following:
Schedule of convertible notes payable |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  | Conversion price per share |  | Interest rate |  | Due date |  | June 30, 2024 |  |  | December 31, 2023 |
Convertible promissory note – original issue discount (“OID”) only |  | 90% of 5-day VWAP |  | OID Only |  | September 28, 2024 |  | $ | 443,000 |  |  | $ | 1,673,000 |
Avalanche International Corp. (“AVLP”) convertible promissory notes, principal |  | $0.35 (AVLP stock) |  | 7% |  | August 22, 2025 |  |  | 9,911,000 |  |  |  | 9,911,000 |
GIGA senior secured convertible notes - in default(1) |  | $0.25 (GIGA stock) |  | 18% |  | October 11, 2024 |  |  | 4,381,000 |  |  |  | 4,388,000 |
ROI senior secured convertible note - in default(1) |  | $0.11 (ROI stock) |  | OID Only |  | April 27, 2024 |  |  | 4,245,000 |  |  |  | 6,513,000 |
Fair value of embedded conversion options |  |  |  |  |  |  |  |  | 154,000 |  |  |  | 910,000 |
Total convertible notes payable |  |  |  |  |  |  |  |  | 19,134,000 |  |  |  | 23,395,000 |
Less: unamortized debt discounts |  |  |  |  |  |  |  |  | (75,000 | ) |  |  | (2,179,000 | )
Total convertible notes payable, net of financing cost, long term |  |  |  |  |  |  |  | $ | 19,059,000 |  |  | $ | 21,216,000 |
Less: current portion |  |  |  |  |  |  |  |  | (9,606,000 | ) |  |  | (11,763,000 | )
Convertible notes payable, net of financing cost – long-term portion |  |  |  |  |  |  |  | $ | 9,453,000 |  |  | $ | 9,453,000 |
| (1) | See Arena litigation discussed in Note 22 below.
6% Convertible Promissory Notes On March 11, 2024, the Company entered into a note purchase agreement with two institutional investors pursuant to which the investors agreed to acquire, and the Company agreed to issue and sell in a registered direct offering to the investors an aggregate of $2.0 million convertible promissory notes, bearing interest of 6%. The convertible promissory notes were converted into shares of Class A common stock in May 2024 at a conversion price of $0.35 per share and the Company recognized a $0.7 million loss on extinguishment of debt. ROI Gain on Extinguishment of Senior Secured Convertible Notes During the six months ended June 30, 2024, ROI converted $2.3 million of ROI senior secured convertible notes that had a fair value of $0.9 million at the time of conversion and recognized a $1.4 million gain on extinguishment of debt. 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, 2024 were:
Schedule of contractual maturities |  |  |  |
Year |  | Principal |
2024 |  | $ | 9,069,000 |
2025 |  |  | 9,911,000 |
|  | $ | 18,980,000 |
Significant inputs associated with the embedded conversion options include:
Schedule of weighted average assumptions |  |  |  |  |  |
|  | June 30, 2024 |  | December 31, 2023 |  | At Inception
Contractual term in years |  | Variable |  | 2.7 |  | 1.0
Volatility |  | 75% |  | 82% |  | 111%
Dividend yield |  | 0% |  | 0% |  | 0%
Risk-free interest rate |  | 4.9% |  | 4.0% |  | 3.5%
Activity related to the embedded conversion option derivative liabilities for the six months ended June 30, 2024 was as follows:
Schedule of derivative liabilities |  |  |  |
Balance as of January 1, 2024 |  | $ | 910,000 |
Change in fair value |  |  | (756,000 | )
Ending balance as of June 30, 2024 |  | $ | 154,000 |

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