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CONVERTIBLE NOTES

9 Months Ended

Sep. 30, 2024

21. CONVERTIBLE NOTES

Convertible notes payable at September 30, 2024 and December 31, 2023, were comprised of the following:

Schedule of convertible notes payable
	Conversion price per share	Interest rate	Due date	September 30, 2024			December 31, 2023
Convertible promissory note –OID only - in default	90% of 5-day VWAP	OID Only	September 28, 2024	$	393,000		$	1,673,000
10% OID convertible promissory note – in default as of October 20, 2024	$0.17	18%	October 19, 2024		4,730,000			-
Avalanche International Corp. (“AVLP”) convertible promissory notes, principal	$0.35 (AVLP stock)	7%	August 22, 2025		9,911,000			9,911,000
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					-			910,000
Total convertible notes payable					19,279,000			19,007,000
Less: unamortized debt discounts					(101,000	)		(2,179,000	)
Total convertible notes payable, net of financing cost, long term				$	19,178,000		$	16,828,000
Less: current portion					(9,725,000	)		(7,375,000	)
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.

10% OID Convertible Promissory Note

On July 18, 2024, the Company entered into a note purchase agreement (the “Purchase Agreement”) with an institutional investor (the “Investor”) pursuant to which the Investor purchased from the Company, on July 19, 2024, in a registered direct offering, a $5.4 million 10% OID Convertible Promissory Note (the “Note”). The Note was sold to the Investor for a purchase price of $4.9 million, which included an OID of $0.5 million. The Note accrues interest at the rate of 15%. The Note matured on October 19, 2024 and is in default as of October 20, 2024. The Note is convertible into shares of Class A common stock at a conversion price of $0.17 per share.

During the three and nine months ended September 30, 2024, the Investor converted $0.7 million of the Note into 3.0 million shares of Class A common stock that had a fair value of $0.9 million at the time of conversion and the Company recognized a $0.2 million loss on extinguishment of debt.

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 nine months ended September 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.

Contractual Maturities

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 September 30, 2024 were:

Schedule of contractual maturities
Year	Principal
2024	$	9,368,000
2025		9,911,000
	$	19,279,000

Significant inputs associated with the embedded conversion options include:


	September 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	4.0%	4.0%	3.5%

Activity related to the embedded conversion option derivative liabilities for the nine months ended September 30, 2024 was as follows:

Schedule of derivative liabilities
Balance as of January 1, 2024	$	910,000
Change in fair value		(910,000	)
Ending balance as of September 30, 2024	$	-