We have an unsecured promissory note of approximately $0.7 million payable to Sterne, Kessler, Goldstein, & Fox, PLLC (“SKGF”), a related party, for outstanding unpaid fees for legal services. The note, as amended, accrues interest at a rate of 4% per annum and provides for monthly payments of principal and interest of $10,000 with a final balloon payment of approximately $0.59 million due at the maturity date of April 30, 2023. We are currently in compliance with all the terms of the note.

Our convertible notes represent 5-year promissory notes that are convertible, at the holders’ option, into shares of our common stock at fixed conversion prices. Interest payments are made on a quarterly basis and are payable, at our option, subject to certain equity conditions, in either cash, shares of our common stock, or a combination thereof. The number of shares issued for interest is determined by dividing the interest payment amount by the closing price of our common stock on the trading day immediately prior to the scheduled interest payment date. To date, all interest payments on the convertible notes have been made in shares of our common stock. We have recognized the convertible notes as debt in our condensed consolidated financial statements.

We have the option to prepay the majority of the notes, subject to a premium on the outstanding principal prepayment amount of 25% prior to the two-year anniversary of the note issuance date, 20% prior to the three-year anniversary of the note issuance date, 15% prior to the four-year anniversary of the note issuance date, or 10% thereafter. The notes provide for events of default that include failure to pay principal or interest when due, breach of any of the representations, warranties, covenants or agreements made by us, events of liquidation or bankruptcy, and a change in control. In the event of default, the interest rate increases to 12% per annum and the outstanding principal balance of the notes plus all accrued interest due may be declared immediately payable by the holders of a majority of the then outstanding principal balance of the notes.

For the six months ended June 30, 2022, convertible notes with a face value of $0.03 million were converted, at the option of the holders, into 250,000 shares of our common stock and we recognized interest expense of approximately $0.12 million related to the contractual interest which we elected to pay in shares of our common stock. For the six months ended June 30, 2022, we issued approximately 439,000 shares of our common stock as interest-in-kind payments on our convertible notes.

In May and June 2022, we issued 5-year convertible notes with an aggregate face value of $1.4 million to accredited investors. The notes have a conversion price of $0.13 per share. We also entered into registration rights agreements with the investors pursuant to which we will register the shares underlying the notes. We have committed to file the registration statement by August 11, 2022 and to cause the registration statement to become effective by the 120th calendar day following the closing date. The registration rights agreement provides for liquidated damages upon the occurrence of certain events, including failure by us to file the registration statement or cause it to become effective by the deadlines set forth above. The amount of liquidated damages is 1.0% of the aggregate subscription upon the occurrence of the event, and monthly thereafter, up to a maximum of 6%, or $0.08 million.

Convertible notes payable at June 30, 2022 and December 31, 2021 consist of the following (in thousands):



	Fixed			Principal Outstanding as of
	Conversion	Interest		June 30,		December 31,
Description	Rate	Rate	Maturity Date	2022		2021
Convertible notes dated September 10, 2018	$0.40	8.0%	September 7, 2023	$	200	$	200
Convertible note dated September 19, 2018	$0.57	8.0%	September 19, 2023		425		425
Convertible notes dated February/March 2019	$0.25	8.0%	February 28, 2024 to March 13, 2024		750		750
Convertible notes dated June/July 2019	$0.10	8.0%	June 7, 2024 to July 15, 2024		295		320
Convertible notes dated July 18, 2019	$0.08	7.5%	July 18, 2024		700		700
Convertible notes dated September 13, 2019	$0.10	8.0%	September 13, 2024		50		50
Convertible notes dated January 8, 2020	$0.13	8.0%	January 8, 2025 ¹		450		450
Convertible notes dated May/June 2022	$0.13	8.0%	May 10, 2027 to June 30, 2027		1,410		-
Total principal balance				$	4,280	$	2,895

¹The maturity date may be extended by one-year increments for up to an additional five years at the holders’ option at a reduced interest rate of 2%.

At June 30, 2022, we estimate our convertible notes have an aggregate fair value of approximately $3.1 million and would be categorized within Level 2 of the fair value hierarchy.

Secured Contingent Payment Obligation

The following table provides a reconciliation of our secured contingent payment obligation, measured at estimated fair market value, for the six months ended June 30, 2022 and the year ended December 31, 2021 (in thousands):



	Six Months Ended June 30, 2022		Year Ended December 31, 2021
Secured contingent payment obligation, beginning of period	$	37,372	$	33,057
Change in fair value		1,240		4,315
Secured contingent payment obligation, end of period	$	38,612	$	37,372

Our secured contingent payment obligation represents the estimated fair value of our repayment obligation to Brickell Key Investments, LP (“Brickell”) under a February 2016 funding agreement, as amended. Brickell is entitled to priority payments of 100% of proceeds received by us from all patent-related actions, after deduction of legal contingent fees, until such time that Brickell has been repaid its remaining principal of approximately $14.7 million. Thereafter, Brickell is entitled to a significant portion of remaining proceeds received from all patent-related actions until such time that Brickell has been repaid its minimum return. The minimum return is determined as a multiple of the funded amount that increases over time. The estimated minimum return due to Brickell was approximately $52.5 million and $48.8 million as of June 30, 2022 and December 31, 2021, respectively. In addition, Brickell may be

entitled to a pro rata portion of proceeds from specified legal actions to the extent aggregate proceeds from those actions exceed the minimum return. The range of potential proceeds payable to Brickell is discussed more fully in Note 10. As of June 30, 2022, we are in compliance with our obligations under this agreement.

We have elected to measure our secured contingent payment obligation at its estimated fair value based on probability-weighted estimated cash outflows, discounted back to present value using a discount rate determined in accordance with accepted valuation methods (see Note 10). The secured contingent payment obligation is remeasured to fair value at each reporting period with changes recorded in the condensed consolidated statements of comprehensive loss until the contingency is resolved.

The following table provides a reconciliation of our unsecured contingent payment obligations, measured at estimated fair market value, for the six months ended June 30, 2022 and the year ended December 31, 2021 (in thousands):