$1.00 is the convertible notes face value -- ie, Par value. It's...

$1.00 is the convertible notes face value -- ie, Par value. It's not the value (implied or otherwise) of the shares.

This means that, for example, if the discounted VWAP is $0.50, then $32m of notes could be converted to 62m shares. From this we can see that, if conversion is exercised, the number of shares would increase somewhere between 62m (being $32m/$0.515) and 128m (being 32m/0.25, with 0.25 being min price).

Raising capital with convertible notes makes more sense than simply issuing new FPO shares. If they did that they would likely be raising at a price sub $0.40. Assuming the company can continue as a going concern, raising funds through convertible notes makes sense -- it's to the advantage of both the company and shareholders (who ultimately own the company). Going the convertible route also provides greater clarity on seniority of claims.