SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
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For the fiscal year ended December 31, 20172023
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Commission file number0-22904000-22904
PARKERVISION, INC.
(Exact Name of Registrant as Specified in its Charter)
Florida | 59-2971472 | |
(State of Incorporation) | (I.R.S. Employer ID No.) |
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7915 Baymeadows Way,4446-1A Hendricks Avenue, Suite 400354,
Jacksonville, Florida 3225632207
(Address of Principal Executive Offices)
Registrant’s telephone number, including area code: (904) 732-6100
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class | Trading Symbol(s) | Name of Each Exchange on Which Registered |
None |
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Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ( )☐ No (X)☒
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Securities Exchange Act. Yes ( )☐ No (X)☒
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d)of the Securities Exchange Act during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes (X) No( )☒ No ☐
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes (X)☒ No ( )
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ( )☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
(Check one):
Large accelerated filer | Accelerated filer |
Non-accelerated filer | Smaller reporting company |
| Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ( ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit reports. ☐
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant's executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Securities Exchange Act). Yes ( )☐ No (X)☒
As of June 30, 2017,2023, the aggregate market value of the registrant’s common stock, $.01 par value, held by non-affiliates of the registrant was approximately $30,366,337$7,864,384 (based upon $1.79$0.096 share closinglast sale price on that date, as reported by NASDAQ)OTCQB).
As of March 28, 2018, 23,806,74615, 2024, 88,295,803 shares of the Issuer's Common Stock were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions
TABLE OF CONTENTS
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Unless the context otherwise requires, in this Annual Report on Form 10-K (“Annual Report”), “we”, “us”, “our” and the “Company” mean ParkerVision, Inc. and its wholly-owned German subsidiary, ParkerVision GmbH.
Forward-Looking Statements
We believe that it is important to communicate our future expectations to our shareholders and to the public. This Annual Report contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including, in particular,without limitation, statements about our future plans, objectives, and expectations under the headings “Item 1. Business” and “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Forward-looking statements include any statement that does not directly relate to any historical or current fact. When used in this Annual Report and in future filings by the Company with the Securities and Exchange Commission (“SEC”), the words or phrases “will likely result”, “management expects”, “we expect”, “will continue”, “is anticipated”, “estimated” or similar expressions are intended to identify such “forward-looking statements.” Readers are cautioned not to place undue reliance on such forward-looking statements, each of which speaks only as of the date made. Such statements are subject to certain risks and uncertainties that could cause actual results to differ materially from historical results and those presently anticipated or projected, including the risks and uncertainties set forth in this Annual Report under the heading “Item 1A. Risk Factors” and in our other periodic reports. Examples of such risks and uncertainties include general economic and business conditions, the outcome of litigation, competition, unexpected changes in technologies and technological advances, the timely development and commercial acceptance of new products and technologies, reliance on key business and sales relationships, reliance on our intellectual property, and the ability to obtain adequate financing in the future. We have no obligation to publicly release the results of any revisions whichthat may be made to any forward-looking statements to reflect anticipated events or circumstances occurring after the date of such statements.
We were incorporated under the laws of the state of Florida on August 22, 1989. We are in the business of innovating fundamental wireless hardware and software technologies and products. We have designed and developed a consumer distributed WiFi product line that is being marketed under the brand name Milo®. We also design and develop proprietary radio frequency (“RF”) technologies and integrated circuits for use in wireless communication products.
We have expended significant financial and other resources to research and develop our RF technologies and to obtain patent protection for those technologies in the United States of America (“U.S.”) and certain foreign jurisdictions. We believe certain patents protecting our proprietary technologies have been broadly infringed by others and therefore the primary focus of our current business plan includesis the enforcement of our intellectual property rights through licensing efforts and patent infringement litigation and licensing efforts.litigation.
Based on the manner in which our management views and evaluates our operations, we have determined that our business currently operates under a single operating and reportable segment. Refer to our consolidated financial statements in Item 8 of this Annual Report for financial data including net losses from operations and total assets.
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Recent Developments
Nasdaq Compliance
On August 11, 2017, we received a notice from the Listing Qualifications Department of Nasdaq stating that, for the last 30 consecutive business days, the market value of the our listed securities (“MVLS”) had been below the minimum of $35 million required for continued inclusion on the Capital Market under Nasdaq Listing Rule 5550(b)(2). In accordance with the notification, we were afforded 180 calendar days, or until February 7, 2018, to regain compliance. In order to regain compliance, our MVLS needed to remain at $35 million or more for a minimum of ten consecutive business days. On February 13, 2018, we received notification that, based upon our continued non-compliance, our securities would be subject to delisting from Nasdaq unless we timely requested a hearing before a Nasdaq Hearings Panel (the “Panel”). We requested a hearing before the Panel and currently, any delisting action has been stayed pending a decision from the Panel regarding our plan to regain compliance with the MVLS or other Nasdaq listing requirements and our request for an extension of time within which to regain compliance.
On March 22, 2018, we received a notice from Nasdaq stating that, for the last 30 consecutive business days, the closing bid price for our common stock had been below the minimum of $1.00 per share required for continued inclusion on Capital Market under Nasdaq Listing Rule 5550(a)(2). The notification letter stated that we would be afforded 180 calendar days (until September 18, 2018) to regain compliance with the minimum bid price requirement. In order to regain compliance, the bid price for shares of our common stock must close at $1.00 per share or more for a minimum of ten consecutive business days. The notification letter also states that in the event we do not regain compliance within the 180 day period, we may be eligible for additional time to the extent we meet the other listing requirements.
WiFi Product Introduction
In October 2017, we began selling a home and small business networking product line under the brand name, Milo®. We currently offer our Milo products through online sales channels that include Amazon.com, Walmart.com, NeweggBusiness.com,have patent enforcement actions ongoing in various U.S. district courts against mobile handset, smart television and our own online store, www.milowifi.com. We also started a direct sales campaign targeting internet serviceother WiFi product providers, for their inclusion of Milo products in offerings to their own customers.
ParkerVision v. Apple and Qualcomm (Middle District of Florida)
On March 8, 2018, the district court in the middle district of Florida denied a motion filed by Qualcomm to transfer the case to the southern district of California. The court also denied a motion filed by Apple to dismiss the case for improper venue. We are awaiting a revised court schedule for the proceedings, including the claim construction hearing that was originally scheduled for January 2018.
General Development of Business
Our core business since 2005 has been focused on the development of wireless technologies. Our technologies represent among other things, unique, proprietary methods for processing RF waveforms in wireless applications. Our technologies apply to both transmit and receive functions of transmitters, receivers, and transceivers as well as other related RF communications functions. A portion of our transmit technology is marketed as Direct2Power™, or d2p™, and enablessemiconductor suppliers, for the transformation of a baseband data signal to an RF carrier waveform, at the desired RF power output level, in a single unified operation. A portion of our receiver technology is marketed as Direct2Data™, or d2d™, and enables the direct conversion of an RF carrier to a baseband data signal, as well as enabling the direct conversion of a baseband signal to a modulated RF carrier signal. This technology is also referred to as energy transfer sampling down conversion for receivers and/or pulse-shaping up conversion for transmitters. We have developed these and a number of additional innovations which are protected by the intellectual property we have secured in various patent families for RF and related functions in RF-based communications.
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For a number of years, we marketed our RF technologies and integrated circuit products for use in mobile products and applications. Our lack of tenure in the mobile handset industry coupled with the unique nature of our technology resulted in lengthy and intense technology evaluation and due diligence efforts by potential customers. Furthermore, in order to utilize our technology in a mobile handset application, we were reliant upon the provider of the baseband processor that generates the data to be transmitted or received by our RF chipsets. Although our technology is capable of interfacing with any baseband processor, the development of the interface between the baseband processor and our chipset requires a cooperative effort with the baseband provider. Accordingly, our marketing efforts were dependent on the activities of third parties. In addition, we believe our technology has been broadly infringed by others thereby reducing the competitive advantage of our technologies. We believe these factors hindered our sales efforts, particularly in markets for portable and consumer wireless applications such as mobile Smartphones and tables.
In 2011, through analysis of conference papers and tear down reports, we concluded that Qualcomm’s products were infringing our energy transfer sampling down conversion technology. Based on our belief that our technology is widely-deployed in the mobile handset market as a result of infringement of our patents, we began to more vigorously pursue an intellectual property licensing strategy which included enforcement actions. We filed a patent infringement lawsuit against Qualcomm in July 2011. Although this case resulted in a $173 million jury award in 2013 for Qualcomm’s infringement of several of our patents, the jury’s decision was ultimately overturned by the district court judge, a decision that was later upheld on appeal. Despite the courts’ decisionsRF patents. We have made significant investments in this Qualcomm action, we continue to believe that certain ofdeveloping and protecting our technologies, the returns on which are broadly infringed and have wide-spread applicationdependent upon the generation of future revenues for realization.
We spent the majority of 2023 supporting our current patent enforcement actions. Beginning in 2020, we filed several patent enforcement cases in the industry.
From 2014Western District of Texas and, through 2017,2023, we pursued licensing opportunities for our technologies, including through additional litigation where we deemed necessary to protect our patent rights. These efforts resulted in ahad entered into four patent license and settlement agreementagreements with Samsungdefendants, resulting in 2016.the dismissal of six pending actions. We currently have ongoingten enforcement actions pending in Texas against five separate foreign defendants and one domestic defendant.
Additionally, we had two patent infringement actionsenforcement cases pending against Qualcomm in the Middle District of Florida. In March 2022, the district court in one of those cases granted several of Qualcomm's pre-trial motions, including a motion for summary judgment thus terminating the case prior to a jury trial. We appealed these decisions to the Federal Circuit and are currently awaiting the Federal Circuit's ruling. The second case which is pending against Qualcomm and Apple andhas been stayed pending the outcome of the first case. We also have a patent enforcement action against LG in both the U.S.District of New Jersey that is stayed pending resolution of the Qualcomm and Germany as well as an action against HTCApple case in the U.S.Florida. See “Legal Proceedings” in Note 13 to our consolidated financial statements included in Item 8 for a full discussiondetailed description of our patent-related litigation activities. various patent enforcement actions.
A significant portion of our litigation costs in 2017 and 2016 werehave been funded under a secured contingent payment arrangement with Brickell Key Investments, LP (“BKI”Brickell”) and other, contingent arrangements with our legal counsel.counsel, and various debt and equity financings. See “Liquidity and Capital Resources” included in Item 87 for a full discussion of our litigation funding arrangements. arrangements and our equity and debt financings.
In addition toProducts and Licenses
Since 2019, we have focused exclusively on our patent enforcement activities, from 2013 through 2017,and licensing efforts. As of December 31, 2023, we also designed and developed products that included integrated circuits (“ICs”) based onhad five licensees for our proprietary technologies, as well end-user WiFi products aimed at the home and small business networking market. These product development efforts culminatedincluding one licensee added in the launch2023. All of our Milo brand product line, which began selling in October 2017.
We anticipate ourlicense agreements resulted from settlement of patent enforcement actions initiated by us. Our patent license and settlement agreements typically include a one-time, up-front payment to cover past and future business will include continued expansion of our Milo product line to include additional complimentary products as well as expanded features and functionality of the current products. Our expansion is expected to result both from internally-developed components, products and features as well as through the acquisition of complimentary business and/or product lines or through joint venture opportunities. We also anticipate a continued focus on licensing our intellectual property for incorporation into wireless devices designed and manufactured by others.
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Our technology is capable of being incorporated for any of the mobile handset standards, as well as a variety of other communications protocols, including WiFi. By pursuing both licensing and product opportunities, we believe our technologies can be deployed in multiple markets that incorporate RF transmitters, receivers, and/or transceivers, including mobile handsets, tablets, femtocells, digital television, machine-to-machine, RF identification, cable modems, satellite communication, and infrastructure, among others. In order to secure proper compensation for the unauthorized use of our technologies, by others,with no future recurring revenue. See “Revenue” in Note 3 to our licensing efforts also include enforcement actions against partiesconsolidated financial statements included in some of these markets who we believe have already deployed products that infringe certain of our patented technologies. Item 8 for additional details.
Milo WiFi Products
Product Offerings
Our Milo-branded WiFi product line is a cost-effective networking system that enhances WiFi connectivity by effectively distributing the WiFi signal from existing routers and modems throughout a broader coverage area, eliminating WiFi dead zones and creating a more even distribution of data rates across the coverage area. Our product offering currently includes a two-unit system designed for coverage areas of up to 2,000 square feet and a three-unit system designed for coverage areas of up to 4,000 square feet. The Milo system can connect to an existing router via Ethernet cable. Alternatively, the system can connect to the router wirelessly through our BaseLink technology thus enabling the Milo user to eliminate redundancy of coverage from an existing router while also optimizing and maximizing the overall coverage area. Our embedded SmartSeek intelligence enables the Milo system to delegate signal communication across multiple radios in each Milo unit, thereby optimizing the network path for each unique environment. The systems are supported by easy-to-use mobile applications for both Apple and Android devices to enhance the overall customer experience.
Markets
Our goal is to provide a cost-effective product solution for inadequate WiFi coverage for consumers, small businesses and certain vertical markets, such as internet service providers. The growing number of internet-connected devices, including smart phones, laptops, tablets, Smart Home, and Internet of Things (“IoT”) devices such as Smart TVs, security cameras, thermostat controls, game consoles, etc., have increased the need for more robust and reliable networking solutions. Internet connections are being upgraded through high-speed broadband technologies in order to address more complex applications and rich multimedia content. Meanwhile, users want the convenience and flexibility of operating truly mobile devices. As a result, the need for more convenience, broader coverage, and increased reliability of residential and small business WiFi networks is increasing demand for wireless networking products.
Sales Channels
We began selling our Milo WiFi products in the U.S. in 2017 primarily through Amazon.com and our own online store. In 2018, we began expanding our online sales channels to include Walmart.com and NeweggBusiness.com. We will be further expanding our sales channels to include additional online retailers and wholesale distributors, including consignment arrangements. The wholesale distributors are expected to supply products to additional online retail channels and internet service providers. In addition, we are marketing our products and related services directly to internet service providers in the U.S. We also anticipate expansion of our sales channels into Canada and Europe in 2018. Amazon.com accounted for 10% or more of our net revenue for the year ended December 31, 2017.
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Integrated Circuit ProductsRF Technologies
Our PV5870 IC is a modulator/demodulator component based on our proprietary technologies and targeted for markets that use less integrated RF transceivers than those used by the mobile handset market, such as infrastructure, industrial and military applications. We sell our PV5870 IC through a distribution relationship with RFMW, Ltd. Our sales of these ICs have been minimal to date.
In August 2017, we completed initial prototypes of our PV6870 IC, a complete single chip WiFi solution intended for sale to product manufacturers who want to incorporate WiFi wireless connectivity into their products. These ICs were developed in connection with third-parties and incorporate our RF technologies. Due to our limited resources, we decreased our investment commitment toward this product late in 2017 but expect to continue to pursue this design in 2018.
Production and Supply
We purchase several key components for our products from third-party suppliers, including contract manufacturers, on a purchase order basis. Our components generally have multiple sources of supply; however some components are designed specifically for our products and, in some cases, require specialty tooling. Our third-party suppliers generally purchase the materials for these components on our behalf on a purchase order basis. Lead times for our component products are generally 60 to 90 days without incurring additional costs for expediting. If our suppliers fail to satisfy our supply requirements, or we fail to adequately anticipate demand for our product, our ability to meet scheduled product deliveries would be impaired and we may lose sales and experience increased component costs. To mitigate our supply risk, we maintain an inventory of component and finished product inventory.
We have produced ICs through fabrication relationships with IBM Microelectronics (“IBM”) and Taiwan Semiconductor Manufacturing Company Limited (“TSMC”). In addition, we own the tooling for fabrication of our PV5870 IC. Given the limited sales to date of our PV5870 ICs, we do not anticipate additional fabrication of this product in the foreseeable future.
Competitive Position
We operate in a highly competitive industry against companies with greater brand recognition and substantially greater financial, technical, and sales and marketing resources. As a result, they may have larger distribution channels and greater reach to customers than we do.
Our WiFi products compete with WiFi networking products offered by companies such as Google, Belkin/Linksys, NetGear, Eero, and others. We also expect to face competition from service providers who bundle competing networking devices with their service offering if we are not the supplier of choice for those service providers. We believe the principal competitive factors in the markets for our networking products include product performance, ease-of-installation, price, customer support, brand and the breadth of sales channels. To compete, we must continue to invest in developing new products and features, expanding our sales channels and maintaining superior customer support.
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Our technologies and IC products face competition from incumbent providers of transceivers, such as Broadcom, Fujitsu, Intel, MediaTek, NVidia, Qualcomm, STMicroelectronics, Marvell, Texas Instruments, and others, as well as incumbent providers of power amplifiers, including companies such as Anadigics, Qorvo, and Skyworks, among others. Each of our competitors, however, also has the potential of becoming a licensing or product customer for our technologies. To date, we are unaware of any competing or emerging RF technologies other than infringing products that provide all the simultaneous benefits that certain of our technologies enable. Our unique technologies process RF carriers in a more optimal manner than prior traditional technologies, thereby allowing the creation of handsets and other products that have extended battery life, lower operating temperatures, more easily incorporate multiple air interface standards and frequencies in smaller form factors, improve operational performance, and reduce manufacturing costs. One or more of these benefits enable some of the key features that can be found in high volume wireless products. Our technologies provide such attractive benefits, in part, because of their unique operational and/or circuit architectures. The benefits our technologies enable include highly accurate transmission and reception of RF carriers that use lessat low power than traditional architectures and components,consumption, thereby extendingenabling extended battery life, reducing heat and enabling certain size, cost, performance, and packaging advantages.
We believe the most significant hurdle to the licensing and/or sale of our technologies and related products is the widespread use of certain of our technologies in infringing products produced by companies with significantly greater financial, technical, and sales, and marketing resources. We believe we can gain adoption and/or secure licensing agreements with unauthorized current users of one or more of our technologies and therefore compete, based on a solid and defensible patent portfolio and the advantages enabled by our unique circuit architectures. patent-protected technologies.
Patents and Trademarks
We consider our intellectual property, including patents, patent applications, trademarks, and trade secrets to be significant to our competitive positioning.business plan. We have a program to file applications for and obtain patents, copyrights, and trademarks in the U.S. and in selected foreign countries where we believe filing for such protection is appropriate to establish and maintain our proprietary rights in our technology and products. As of December 31, 2017,2023, we had 198approximately 50 active U.S. and 36 foreign patents related to our RF technologies. In addition, we have approximately 30 U.S. and foreignover 50 patents that have expired over the past five years that we believe continue to have significant economic value as a result of our ability to assert past damages in our patent applications pending.enforcement actions. We estimate the economic lives of our patents to be the shorter of fifteen toyears from issuance or twenty years and ourfrom the earliest application date. Our current portfolio of issued patents have expirationsexpiration dates ranging from 20182024 to 2034.2036.
Research and Development
We have made significant investments in research and development in order to develop existing and new technologies in-house and to evaluate and test existing and new third-party technologies. Our research and development efforts have included the development and advancement of RF technologies, including the development of prototype ICs and related software interfaces, development and testing of our networking products, including the operating system software and mobile applications for those products, and the creation of test programs for quality control testing of our products. For the years ended December 31, 2017 and 2016, we spent approximately $4.3 million and $3.3 million, respectively, on Company-sponsored research and development activities.
Sales, Marketing and Customer Support
We support our sales channels through advertising, online promotions, and video testimonials and demonstrations. Our sales and marketing team, which includes both in-house and outside resources, focuses on brand development, product strategy, the new product introduction process, demand
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assessment, and competitive analysis as well as channel expansion including direct sales to internet service providers. This team is also responsible for driving the traditional and digital marketing strategies and public relations.
Consumers often lack the technical knowledge and resources to implement advanced technologies. Therefore a customer-friendly installation experience is an important factor for this market. Our systems are designed with the consumer experience in mind. In addition, we have an internal, U.S.-based customer support group that provides support to those customers who have more complex environments or desire additional support. We provide customer support through a variety of channels including phone, chat, social media and email. Our support team also manages our technical support knowledge base for self-help customers and gathers customer feedback that is used to enhance our future product offerings. We believe an outstanding customer service experience is a differentiating factor for our products.
Employees
As of December 31, 2017,2023, we had 45seven full-time employees and 5one part-time employees, including 18 in research and development, 12 in sales, marketing and customer support, 7 in operations including sourcing and production, and 13 in executive management, finance, information systems and administration.employee. We also outsource certain specialty services, such as information technology and public relations, and utilize a number of temporary or contract staff and third-party consultants from time to time to supplement our workforce. Our employees are not represented by any collective bargaining agreements and we consider our employee relations to be satisfactory.
Following the COVID-19 pandemic, we reverted to fully remote worksites for all of our employees. Our management, with the oversight of our board of directors, monitors the hiring, retention, and management of our employees.
Available Information and Access to Reports
We file annual reports on Forms 10-K, quarterly reports on Forms 10-Q, proxy statements and other reports, including any amendments thereto, electronically with the SEC. The SEC maintains an Internet site (http://www.sec.gov) where these reports may be obtained at no charge. Copies of these reports may also be obtained from the SEC’s Public Reference Room at 100 F Street, NE, Washington, DC 20549. Information on the operation of the SEC Public Reference Room may be obtained by calling the SEC at 1-800-SEC-0330. We also make copies of these reports available, free of charge through our website (http://www.parkervision.com) via the link “SEC filings” as soon as practicable after filing or furnishing such materials with the SEC. We also will provide copies of the annual report on Form 10-K and the quarterly reports on Forms 10-Q filed during the current fiscal year, including any amendments thereto, upon written request to us at ParkerVision, Inc., Investor Relations, 7915 Baymeadows Way, Suite 400, Jacksonville, Florida, 32256. These reports will be provided at no charge. Exhibits to these reports may be obtained at a cost of $.25 per page plus $5.00 postage and handling.
Corporate Website
We webcast our earnings calls and certain events we participate in or host with members of the investment community in the investor relations section of our website. Additionally, we announce investor information, including news and commentary about our business, financial performance and related matters, SEC filings, notices of investor events, and our press and earnings releases, in the investor relations section of our website (http:(http://ir.parkervision.com)ir.parkervision.com). Additionally, if applicable, we webcast our earnings calls and certain events we participate in or host with members of the investment community in the investor relations section of our website. Investors and others can receive notifications of new information posted in the investor relations section in real time by signing up for email alerts and/or RSS feeds. Further corporate governance information, including our governance guidelines, boardBoard committee charters, and code of conduct, is also available in the investor relations section of our website under the heading “Corporate Governance.” The content of our website is not incorporated by reference into this Annual Report or in any other report or document we file with the SEC, and any references to our website are intended to be inactive textual references only.
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In addition to other risks and uncertainties described in this Annual Report, the following risk factors should be carefully considered in evaluating our business because such factors may have a significant impact on our business, operating results, liquidity and financial condition. As a result of the risk factors set forth below, actual results could differ materially from those projected in any forward-looking statements.
Financial and Operating Risks
Our financial condition raises substantial doubt as to our ability to continue as a going concern.
We have had significant losses in prior years resulting in an accumulated deficit at December 31, 2023, of approximately $433.7 million. Although we generated $10.8 million in cash flow from operations for the year ended December 31, 2023, our debt repayment obligations exceeded our operating cash flows and we relied on new borrowings to fund a portion of our operations in 2023. There can be no guarantee that we will continue to generate positive cash flows from operations or that those cash flows will be sufficient to meet our debt obligations as they come due. Our independent registered public accounting firm has included in their audit opinion on our consolidated financial statements as of and for the year ended December 31, 20172023, a statement with respect to substantial doubt regardingabout our ability to continue as a going concern. Note 2 to our consolidated financial statements included in Item 8 includes a discussion regarding our liquidity and our ability to continue as a going concern. Our consolidated financial statements have been prepared assuming we will continue to operate as a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. If we become unable to continue as a going concern, we may have to liquidate our assets and the values we receive for our assets in liquidation or dissolution could be significantly lower than the values reflected in our consolidated financial statements. The substantial doubt as to our ability to continue as a going concern may adversely affect our ability to negotiate reasonable terms with our suppliersvendors and may adversely affect our ability to raise additional capital in the future.
We have had a history of losses which may ultimately compromise our ability to implement our business plan and continue in operation.
We have had losses in each year since our inception in 1989, and continue to have an accumulated deficit which, atThrough December 31, 2017, was approximately $371.4 million. The net loss for 2017 was approximately $19.3 million. To date,2022, our technologies and products havedid not producedproduce revenues sufficient to cover our operating research and development and overhead costs. We will continue to make expenditures on patent protection and enforcement research and development, marketing and sales, and general operations in order to secure and fulfill any contracts that we achieve for the sale of our products or technologies. Our revenues in 2018 may not bring us to profitability andcontinue our current patent enforcement and licensing efforts. Although we recognized sufficient revenues from patent licensing and settlement agreements to cover our operating costs and achieve profitability in 2023, required repayments of contingent expenses and debt obligations have resulted in insufficient capital resources are not sufficient to sustainfor sustainment of our operations through 2018.2024. If we are not able to generate sufficient revenues or obtain sufficient capital resources, we willmay not be able to implement our business plan or meet our current obligations due within the twelve months after the issuance date of our consolidated financial statements and investors will suffer a loss in their investment. This may also result in a change in our business strategies.
We will need to raise substantial additional capital in the future to fund our operations. Failure to raise such additional capital may prevent us from implementing our business plan as currently formulated.
Because we have hada history of net losses and to date, have not generated positivenegative cash flow from operations, we have funded our operating lossescosts primarily from the sale of debt and equity securities, and throughincluding our secured and unsecured contingent debt obligation.obligations. Our current capital resources include cash and cash equivalents including restricted cash equivalents, and available-for-sale securities of $1.4$2.6 million at December 31, 2017. Our business plan will continue to require significant expenditures for research and development, patent protection and enforcement, marketing and sales, and general operations. For the year ended December 31, 2017, we used $14.1 million in cash for operations2023, which was funded primarily through the sale of equity securities. We expect the implementation of significant cost reduction measures in order to reduce our
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cash needs may jeopardize our operations and future growth plans. Our current capital resources will not be sufficientare insufficient to meet our working capital needs for the twelve months after the issuance of our consolidated financial statementsstatements. Our business plan will continue to require expenditures for patent protection and enforcement and general operations. If we do not generate sufficient revenues from our licensing and patent enforcement programs, we will require additional capital to fund our operations. Additional capital may be in the form of debt securities, the sale of equity securities, including common or preferred stock, additional litigation funding, or a combination thereof. Failure to raise additional capital willmay have a material adverse impact on our ability to achieve our business objectives.
The issuance of
Raising additional capital by issuing debt securities or additional equity securities may result in dilution and/or impose covenants or restrictions that create operational limitations or other obligations.
We will require additional capital to fund our operations and meet our current obligations due within the twelve months after the issuance date of our consolidated financial statements. Financing, if any, may be in the form of debt or sales of equity securities, including common or preferred stock. The sale of equity securities, including common or preferred stock, may result in dilution to the current shareholders’ ownership and may be limited by the number of shares we have authorized and available for issuance. Debt instruments or the sale of preferred stock may result in the imposition of operational limitations and other covenants and payment obligations, any of which may be burdensome to us and may have a material adverse impact on our ability to implement our business plan as currently formulated. The sale of equity securities, including common or preferred stock, may result in dilution to the current stockholders’ ownership and may be limited by the number of shares we have authorized and available for issuance.
We may be obligated to repay outstanding notes at a premium upon the occurrence of an event of default.
We have $4.9 million in outstanding principal under convertible notes at December 31, 2023. If we fail to comply with the various covenants set forth in each of the notes, including failure to pay principal or interest when due or consummating a change in control, we could be in default thereunder. Upon an event of default under each of the notes, the interest rate of the notes will increase to 12% per annum and the outstanding principal balance of the notes plus all accrued unpaid interest may be declared immediately payable by the holders. We may not have sufficient available funds to repay the notes upon an event of default, and we cannot provide assurances that we will be able to obtain other financing at terms acceptable to us, or at all.
Our ability to utilize our tax benefits could be substantially limited if we fail to generate sufficient income or if we experience an “ownership“ownership change.”
We have cumulative net operating loss carryforwards (“NOLs”) totaling approximately $328.4$279.8 million at December 31, 20172023, of which expire$239.1 million is subject to expiration in varying amounts from 20182024 to 2036.2037. Our ability to fully recognize the benefits from those NOLs is dependent upon our ability to generate sufficient income prior to their expiration. In addition, our NOL carryforwards may be limited if we experience an ownership change as defined by Section 382 of the Internal Revenue Code.Code (“Section 382”). In general, an ownership change under Section 382 occurs if one or more 5% shareholders increase their collective ownership of the aggregate amount of our outstanding shares by more than 50 percentage points over a relevant lookback period. In order to avoid limitations imposed byWe have sold a significant number of equity securities over the relevant lookback period which increases the risk of triggering an ownership change under Section 382 offrom the Code, we may be limited in the amountfuture sale of additional equity securities we are ablesecurities. An ownership change under Section 382 will significantly limit our ability to sell to raise capital. Accordingly,utilize our desire to preserve our NOLs may cause us to forgo otherwise attractive funding opportunities.tax benefits.
Our litigation funding arrangements may impair our ability to obtain future financing and/or generate sufficient cash flows to support our future operations.
We have funded much of our cost of litigation through contingent financing arrangements with a third-party funderBrickell Key Investments LP (“Brickell”) and others and contingent fee arrangements with legal counsel. The repayment obligation to the third-party funderBrickell is secured by the majority of our assets until such time that we have repaid a specified minimum return.assets. Furthermore, our contingent financing arrangements will result in reductions in the amount of net proceeds retained by us from litigation, licensing, and other patent-related activities. For example, the third-party litigation funder is entitledThe contingent fees payable to priority payment of at least the next $10.7 million in patent-related proceeds received by us. Thereafter, any remaining net proceeds will be prorated between us, our legal counsel, Brickell and the third-party funder.others will consume all of our initial future proceeds up to specified limits and will likely exceed half of our proceeds thereafter depending on size and timing of proceeds, among other factors. The long-term continuation of our business plan is dependent upon our ability to secure sufficient financing to support our business, and our ability to generate revenues and/or patent related proceeds sufficient to offset expenses and meet our contingent payment obligation.obligations. Failure to generate revenue or other patent-related proceeds sufficient to repay our contingent obligationobligations may impede our ability to obtain additional financing which will have a material adverse effect on our ability to achieve our long-term business objectives.
Our litigation can be time-consuming, costly and we cannot anticipate the results.
Since 2011, we have spent a significant amount of our financial and management resources to pursue patent infringement litigation against third parties. We believe this litigation, and othersother litigation matters that we may in the future determine to pursue, couldwill continue to consume management and financial resources for long periods of time. There can be no assurance that our current or future litigation matters will ultimately result in a favorable outcome for us.us or that our financial resources will not be exhausted before achieving a favorable outcome. In addition, even if we obtain favorable interim rulings or verdicts in particular litigation matters, they may not be predictive of the ultimate resolution of the matter. For example, we received a favorable jury decision in our litigation against Qualcomm, but that jury decision was overturned by the district court and the appellate court supported the district court decision. Unfavorable outcomes could result in exhaustion of our financial resources and could otherwise hinder our ability to pursue licensing and/or product opportunities for our technologies which wouldin the future. Failure to achieve favorable outcomes from one or more of our patent enforcement actions will have a material adverse impact on our financial condition, results of operations, cash flows, and business prospects. We have contingent fee arrangements in place with others to reduce our litigation-related expenditures; however any litigation-based, or other patent related amounts collected by us will be subject to contingency payments to our legal counsel and other funding parties which will reduce the amount retained by us.
If our patents and intellectual property rights do not provide us with the anticipated market protections, our competitive position, business, and prospects will be impaired.
We rely on our intellectual property rights, including patents and patent applications, to provide competitive advantage and protect us from theft of our intellectual property. We believe that our patents are for entirely new technologies and that our patents are valid, enforceable, and valuable. However, third parties have made claims of invalidity with respect to certain of our patents and other similar claims may be brought in the future. For example, in onethe Patent Trial and Appeal Board has issued a number of rulings invalidating challenged claims of certain of our litigations with Qualcomm Incorporated, the appellate court ruled that tenpatents as a result of eleventhird-party challenges filed by defendants in our patent claims that were the subject of such action were invalid.enforcement actions. If our patents are shown not to be as broad as currently believed or are otherwise challenged such that some or all of the protection is lost, we will suffer adverse effects from the loss of competitive advantage and our ability to offer unique products and technologies. As a result, there would be an adverse impact on our financial condition and business prospects. Furthermore, defending against challenges to our patents may give rise to material costs for defense and divert resources away from our other activities.
Our business, results of operations, and financial condition may be impacted by risks related to pandemics and other similar outbreaks.
The COVID-19 pandemic created significant volatility and uncertainty in financial markets and negatively impacted the timing of our current patent enforcement actions as a result of travel restrictions, office closures and court closures. Future pandemics or other similar outbreaks could likewise adversely impact our business, results of operations and financial condition. For example, market volatility and uncertainty could impact our ability to raise additional capital on terms that are acceptable to us, or at all. Additionally, business shut-downs, court closures, and travel restrictions resulting from future outbreaks could cause material delays in our patent enforcement and licensing program which is currently our sole source of revenue. The extent to which future pandemics or similar outbreaks impact our ongoing business strategy, as well as our results of operations and financial condition, generally, will depend on future developments which are highly uncertain and cannot be predicted, including the severity and duration of the outbreak and the actions taken by governments and private businesses to contain or treat its impact, among others. If the disruptions posed by future pandemics or outbreaks continue for an extensive period of time, our business, results of operations, and financial condition may be materially adversely affected.
We are subject to outside influences beyond our control, including new legislation that could adversely affect our licensing and enforcement activities and have an adverse impact on the execution of our business plan.
Our licensing and enforcement activities are subject to numerous risks from outside influences, including new legislation, regulations and rules related to obtaining or enforcing patents. For instance, the U.S. has enacted sweeping changes to the U.S. patent system including changes that transition the U.S. from a “first-to-invent” to a “first to file”“first-to-file” system and other changes that alter the processes for challenging issued patents. To the extent that we are unable to secure patent protection for our future technologies and/or our current patents are challenged such that some or all of our protection is lost, we will suffer adverse effects to our ability to offer unique products and technologies. As a result, there would be an adverse impact on our financial position, results of operations and cash flows and our ability to execute our business plan.
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Our industry is subject to rapid technological changes which if we are unable to match or surpass, will result in a loss of competitive advantage and market opportunity.
Because of the rapid technological development that regularly occurs in the wireless technology industry, along with shifting user needs and the introduction of competing products and services, we must continually devotehave historically devoted substantial resources to developing and improving our technology and introducing new product offerings. For example, in fiscal years 2017 and 2016,As a result of our limited financial resources, we spent approximately $4.3 million and $3.3 million, respectively, on research and development and, we expect to continue to spend a significant amount in this area in the future. These efforts and expenditures are necessary to establish market share and, ultimately, to generate revenues. If another company offers better products or technologies, a competitive position or market window opportunity may be lost, and therefore our revenues or revenue potential may be adversely affected.
If our technologies and/or products are not commercially accepted, our developmental investment will be lost and our ability to do business will be impaired.
There can be no assurance thathave ceased our research and development will produce commercially viable technologies and products, or that our technologies and products will be established in the market as improvements over current competitive offerings. If our existing or new technologies and products are not commercially accepted, the funds expended will not be recoverable, and our competitive and financial position will be adversely affected. In addition, perception of our business prospects will be impaired with an adverse impact on our ability to do business and to attract capital and employees.
We are reliant on component suppliers and contract manufacturers for adequate supply of components for our products, and the failure of our supply chain due to financial problems of suppliers, a shortage of adequate component supply or manufacturing capacity, or other factors that results in an increase in our costs or a delay in our ability to fill customer orders, could have an adverse impact on our business or operating results.
Our growth and ability to meet customer demand for our products depend, in part, on our ability to obtain timely deliveries of parts from our suppliers and contract manufacturers. We may in the future experience a shortage of certain component parts as a result of our own manufacturing issues, manufacturing or capacity issues at our suppliers or contract manufacturers, financial problems of our suppliers, or strong demand in the industry for those parts. During periods of shortages or delays, the price of components may increase, or the components may not be available at all. We may also encounter shortages if we do not accurately anticipate our needs. We may not be able to secure enough components at reasonable prices or of acceptable quality to build new products to meet customer demand. A reduction or interruption in supply, a significant increase in the price of one or more components, or a failure to appropriately adjust our requirements based on our business needs, could adversely impact our revenue and gross margins.
If we fail to properly estimate customer demand for our products, an oversupply of component partsactivities which could result in excess or obsolete inventory thata loss of future market opportunity which could adversely affect our operating results.
Our operating results would be adversely affected if, anticipating greater demand for our products than actually develops, we commit to the purchase of more component parts than we need which is more likely to occur in a period of demand uncertainties such as during the rollout of a new product line like our Milo product line. In addition, component purchase commitments made by us in order to shorten lead times could also lead to excess and obsolete inventory charges. If we fail to anticipate customer demand properly, an oversupply of component parts could result in excess or obsolete components that could adversely affect our gross margins and operating results.
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If we experience quality issues with our products, our competitive position, business and market opportunity may be impaired.
We produce products that incorporate leading-edge technology, including both hardware and software. Software typically contains bugs that can unexpectedly interfere with expected operations. There can be no assurance that our pre-shipment testing programs will be adequate to detect all defects, either ones in individual products or ones that could affect numerous shipments, which might interfere with customer satisfaction, reduce sales opportunities, or affect gross margins. If we have to replace certain components and provide remediation in response to the discovery of defects or bugs in products that we had shipped, there can be no assurance that such remediation would not have a material impact. An inability to cure a product defect could result in the failure of a product line, damage to our reputation, inventory costs, or product reengineering expenses, any of which could have a material impact on ourfuture revenue margins, and net income.potential.
We are highly dependent on Mr. Jeffrey Parker as our chief executive officer. If his services were lost, it would have an adverse impact on the execution of our business plan.
Because of Mr. Parker’s leadership position in the company andCompany, the respectrelationships he has garnered in both the industry in which we operate and the investment community and the key role he plays in our patent litigation strategies, the loss of his services might be seen as an impediment to the execution of our business plan. If Mr. Parker was no longer available to the company,Company, investors might experience an adverse impact on their investment. We maintain $5 million in key-employee life insurance for our benefit for Mr. Parker.
If we are unable to attract or retain key executives and other highly skilled employees, we will not be able to execute our current business plans.
Our business is very specialized, and therefore it is dependent on having skilled and specialized key executives and other employees to conduct our research, development and customer supportbusiness activities. The inability to obtain or retain these key executives and other specialized employees would have an adverse impact on the research, developmenttechnical support activities and technical customer supportthe financial reporting and regulatory compliance activities that our products require.business requires. These activities are instrumental to the successful execution of our business plan.
There
Any disruptions to our information technology systems or breaches of our network security could interrupt our operations, compromise our reputation, and expose us to litigation, government enforcement actions, and costly response measures and could have a material adverse effect on our business, financial condition, and results of operations.
We rely on information technology systems, including third-party hosted servers and cloud-based servers, to keep business, financial, and corporate records, communicate internally and externally, and operate other critical functions. If any of our internal systems or the systems of our third-party providers are compromised due to computer virus, unauthorized access, malware, and the like, then sensitive documents could be exposed or deleted, and our ability to conduct business could be impaired. Cyber incidents can result from deliberate attacks or unintentional events. These incidents can include, but are not limited to, unauthorized access to our systems, computer viruses or other malicious code, denial of service attacks, malware, ransomware, phishing, SQL injection attacks, human error, or other events that result in security breaches or give rise to the manipulation or loss of sensitive information or assets. Cyber incidents can be caused by various persons or groups, including disgruntled employees and vendors, activists, organized crime groups, and state-sponsored and individual hackers. Cyber incidents can also be caused or aggravated by natural events, such as earthquakes, floods, fires, power loss, and telecommunications failures. The risk of cybersecurity breach has generally increased as the number, intensity, and sophistication of attempted attacks from around the world has increased. While we have cyber security procedures in place, given the evolving nature of these threats, there can be no assurance that our common stockwe will continuenot suffer material losses in the future due to trade on the Nasdaq Capital Market or another national securities exchange.cyber-attacks.
On February 13, 2018,To date, we received a letter from the Listing Qualifications Department of Nasdaq indicating that, based upon our continued non-compliance with Nasdaq Listing Rule 5500(b)(2), which requires an issuerhave not experienced any material losses relating to maintain a minimum market value of listed securities (“MVLS”) of $35 million, our securities would be subject to delisting from Nasdaq unless we timely requested a hearing before a Nasdaq Hearings Panel. We requested a hearing and any delisting action has currently been stayed pending a decision from the Nasdaq Hearings Panel regarding our plan to regain compliance with the MVLScyber-attacks, computer viruses or other Nasdaq listing requirementssystems failures. Although we have taken steps to protect the security of data maintained in our information systems, it is possible that our security measures will not be able to prevent the systems’ improper functioning or the improper disclosure of personally identifiable information, such as in the event of cyber-attacks. In addition to operational and business consequences, if our request for an extensioncybersecurity is breached, we could be held liable to our customers or other parties in regulatory or other actions, and we may be exposed to reputation damages and loss of time within which to regain compliance. Also, on March 22, 2018, we received a notice from the Listing Qualifications Department of Nasdaq stating that, for the last 30 consecutive business days, the closing bid price for our common stock had been below the minimum of $1.00 per share required for continued inclusion on the Capital Market under Nasdaq Listing Rule 5550(a)(2). The notification letter stated that we would be afforded 180 calendar days (until September 18, 2018) to regain compliance with the minimum bid price requirement. In order to regain compliance, the bid price for shares of our common stock must close at $1.00 per sharetrust and business. This could result in costly investigations and litigation, civil or more for a minimum of ten consecutive business days. Delisting could adversely affect our ability to raise additional financing through the public or private sale of our equity securities, would
15criminal penalties, fines, and negative publicity.
significantly affect the ability of investorsRisks Relating to trade our securities and would negatively affect the value and liquidity of our common stock. Delisting could also have other negative results, including the potential loss of confidence by employees, the loss of institutional investor interest and fewer business development opportunities.Common Stock
Our outstanding options warrants, and restricted share unitswarrants may affect the market price and liquidity of the common stock.
At December 31, 2017,2023, we had 21.287.7 million shares of common stock outstanding and had 1.9 millionoutstanding options warrants, and restricted share units outstandingwarrants for the purchase and/or issuance of up to 36.4 million additional shares of common stock. Of these outstanding equity instruments, 1.1stock, of which approximately 35.2 million were exercisable as of December 31, 2017.2023. In addition, as described more fully below, holders of convertible notes may elect to receive up to 36.4 million shares of common stock upon conversion of the notes, and we may elect to pay accrued interest on the notes in shares of our common stock. The majority of the shares of common stock underlying these securities are currently registered for sale to the holder or for public resale by the holder. The amount of common stock availablereserved for the salesissuance may have an adverse impact on our ability to raise capital and may affect the price and liquidity of theour common stock in the public market. In addition, the issuance of these shares of common stock will have a dilutive effect on current shareholders’stockholders’ ownership.
The conversion of outstanding convertible notes into shares of common stock, and the issuance of common stock by us as payment of accrued interest upon the convertible notes, could materially dilute our current stockholders.
We have an aggregate principal amount of $4.9 million in convertible notes outstanding at December 31, 2023. The notes are convertible into shares of our common stock at fixed conversion prices, which may be less than the market price of our common stock at the time of conversion. If the entire principal were converted into shares of common stock, we would be required to issue an aggregate of up to 36.4 million shares of common stock. If we issue all of these shares, the ownership of our current stockholders will be diluted.
Further, we may elect to pay interest on the notes, at our option, in shares of common stock, at a price equal to the then-market price for our common stock. From 2018 to 2023, we issued an aggregate of approximately 7.3 million shares of common stock as in-kind interest payments on our convertible notes. We currently do not believe that we will have the financial ability to make payments on the notes in cash when due. Accordingly, we currently intend to make such payments in shares of our common stock to the greatest extent possible. Such interest payments could further dilute our current stockholders.
The price of our common stock may be subject to substantial volatility.
The trading price of our common stock has been and may continue to be volatile. Between January 1, 20162022 and December 31, 2017 (after giving effect to the one-for-ten reverse stock split on March 30, 2016),1, 2024, the reported high and low salesales prices for our common stock ranged between $8.18 $0.07 and $1.02$1.20 per share. The price of our common stock may continue to be volatile as a result of a number of factors, some of which are beyond our control. These factors include, but are not limited to, developments in outstanding litigations,litigation, our performance and prospects, general conditions of the markets in which we compete, and economic and financial conditions.conditions, and the impact of future pandemics on global financial markets. Such volatility could materially and adversely affect the market price of our common stock in future periods.
Our common stock is quoted on OTCQB, an over-the-counter market. There can be no assurance that our common stock will continue to trade on the OTCQB or on another over-the-counter market or securities exchange.
Our common stock began trading on the OTCQB, an over-the-counter market, in August 2018 immediately following delisting from Nasdaq, under the symbol “PRKR”. The over-the-counter market is a significantly more limited market than a nationally-recognized securities exchange such as Nasdaq, and the quotation of our common stock on the over-the-counter market has resulted in a less liquid market available for existing and potential stockholders to trade shares of our common stock. Securities traded in the over-the-counter market generally have less liquidity due to factors such as the reduced number of investors that will consider investing in the securities, the reduced number of market makers in the securities, and the reduced number of securities analysts that follow such securities. As a result, holders of shares of our common stock may find it difficult to resell their shares at prices quoted in the market or at all. We are also subject to additional compliance requirements under applicable state laws relating to the issuance of our securities. This could have a long-term adverse effect on our ability to raise capital, which ultimately could adversely affect the market price of our common stock. We cannot provide any assurances as to if or when we will be in a position to relist our common stock on a nationally-recognized securities exchange.
Our common stock is classified as a “penny stock” under SEC rules, which means broker-dealers who make a market in our stock will be subject to additional compliance requirements.
Our common stock is deemed to be a "penny stock" as defined in the Securities Exchange Act of 1934 (the “Exchange Act”). Penny stocks are stocks (i) with a price of less than five dollars per share; (ii) that are not traded on a recognized national exchange; (iii) whose prices are not quoted on an automated quotation system sponsored by a recognized national securities association; or (iv) whose issuer has net tangible assets less than $2,000,000 (if the issuer has been in continuous operation for at least three years); or $5,000,000 (if continuous operations for less than three years); or with average revenues of less than $6,000,000 for the last three years. The Exchange Act requires broker-dealers dealing in penny stocks to provide potential investors with a document disclosing the risks of penny stocks and to obtain a manually signed and dated written receipt of the document before effecting any transaction in a penny stock for the investor’s account. Potential investors in our common stock are urged to obtain and read such disclosure carefully before purchasing any shares that are deemed to be “penny stock.” Further, the Exchange Act requires broker-dealers dealing in penny stocks to approve the account of any investor for transactions in such stocks before selling any penny stock to that investor. These procedures require the broker-dealer to (i) obtain from the investor information concerning his, her or its financial situation, investment experience and investment objectives; (ii) reasonably determine, based on that information, that transactions in penny stocks are suitable for the investor, and that the investor has sufficient knowledge and experience as to be reasonably capable of evaluating the risks of penny stock transactions; (iii) provide the investor with a written statement setting forth the basis on which the broker dealer made the determination in (ii) above; and (iv) receive a signed and dated copy of such statement from the investor, confirming that it accurately reflects the investor’s financial situation, investment experience and investment objectives. Compliance with these requirements may affect the ability or willingness of broker-dealers to sell our securities, and accordingly would affect the ability of stockholders to sell their securities in the public market. These additional procedures could also limit our ability to raise additional capital in the future.
We do not currently pay dividends on our common stock and thus stockholders must look to appreciation of our common stock to realize a gain on their investments.
We do not currently pay dividends on our common stock and intend to retain our cash and future earnings, if any, to fund our business plan. Our future dividend policy is within the discretion of our board of directors and will depend upon various factors, including our business, financial condition, results of operations and capital requirements. We therefore cannot offer any assurance that our board of directors will determine to pay special or regular dividends in the future. Accordingly, unless our board of directors determines to pay dividends, stockholders will be required to look to appreciation of our common stock to realize a gain on their investment. There can be no assurance that this appreciation will occur.
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We have a shareholder protection rights plan that may delay or discourage someone from making an offer to purchase the company without prior consultation with the board of directors and management, which may conflict with the interests of some of the shareholders.
On November 17, 2005, as amended on November 20, 2015, our board of directors adopted a shareholder protection rights plan which called for the issuance, on November 29, 2005, as a dividend, of rights to acquire fractional shares of preferred stock. The rights are attached to the shares of common stock and transfer with them. In the future the rights may become exchangeable for shares of preferred stock with various provisions that may discourage a takeover bid. Additionally, the rights have what are known as “flip-in” and “flip-over” provisions that could make any acquisition of the company more costly. The principal objective of the plan is to cause someone interested in acquiring the company to negotiate with the board of directors rather than launch an unsolicited bid. This plan may limit, prevent, or discourage a takeover offer that some shareholders may find more advantageous than a negotiated transaction. A negotiated transaction may not be in the best interests of the shareholders.
Provisions in our certificate of incorporation and by-laws could have effects that conflict with the interest of shareholders.
Some provisions in our certificate of incorporation and by-laws could make it more difficult for a third party to acquire control of us. For example, our board of directors is divided into three classes with directors having staggered terms of office, our board of directors has the ability to issue preferred stock without shareholder approval, and there are advance notification provisions for director nominations and submissions of proposals from shareholders to a vote by all the shareholders under the by-laws. Florida law also has anti-takeover provisions in its corporate statute.
Item 1B. UnresolvedUnresolved Staff Comments.
Not applicable.
Item 2. Properties.1C. Cybersecurity.
For purposes of the following disclosure, the terms "cybersecurity incident" and "cybersecurity threat" have the meanings given to such terms in Item 106 of Regulation S-K promulgated under the Securities Exchange Act of 1934.
Given the small size of our organization, we leverage a third-party information technology ("IT") service provider for management of our information systems needs. Our IT service provider works closely with executive management in the assessment, identification and management of cybersecurity threats. Cybersecurity threats are prevented and detected by multiple approaches, including perimeter defense, vulnerability management, intrusion testing, multifactor authentication and data protection. We are in the process of developing a formal cybersecurity awareness program that will include cybersecurity training for all employees and relevant contractors and will be integrated with our overall risk management process. Material risks from cybersecurity threats, including those associated with the use of third-party service providers, are assessed during our annual review of our enterprise risks and related controls.
Our headquartersoverall Board of Directors ("Board") has oversight of all enterprise risks, including those arising from cybersecurity threats. The Board has not assigned that responsibility to any committee or subcommittee of the Board. Assessments of ongoing and emerging enterprise risks, including cybersecurity threats, if applicable, are located in a 14,000 square foot leased facility in Jacksonville, Florida. an integral part of our regularly scheduled Board meetings.
We have an additional 7,000 square foot leased facilityinformal cyber incident response plan for mitigating and remediating cybersecurity threats and incidents. Any identified cybersecurity threats and incidents are promptly reported to executive management who, along with our IT professionals, will assess the severity of the event and formulate a response. Our determination of the severity of a cybersecurity incident would generally include an evaluation of the incident's effect on the Company, including (i) our business strategy, results of operations, or financial condition, (ii) the integrity, confidentiality, resiliency, and security of our networks and systems, and (iii) our operations. Based on the severity of the event, the Board will be notified and will provide strategic direction through the incident response and communication.
We rely on technology in Lake Mary, Florida primarilyall aspects of our business, including information systems of our third-party service providers. The information systems upon which we depend have been, and likely continue to be, subject to cybersecurity threats such as unauthorized access attempts, business email compromise, phishing, malware, ransomware, hacking and other cyberattacks attempting to disrupt operations. Our dependence on these information systems exposes us to cyberattacks, both directly and through cyberattacks impacting our service providers. A significant cybersecurity incident could result in service interruptions, security events, regulatory compliance failures, the inability to protect employee or corporate information or assets against unauthorized access or use, or other operational difficulties. As described above, we continuously monitor our cybersecurity threats, including risks associated with our use of service providers. We are not aware of any risks from cybersecurity threats, or previous cybersecurity incidents, that have materially affected or are reasonably likely to materially affect our business strategy, results of operations, or financial condition.
Since November 2020, we have operated in a fully remote worksite environment for engineering design activities. These facilities consistall of general office space with laboratory facilities for product development activities. We also lease a 3,000 square foot facility in Jacksonville, Florida that serves as our warehousing and manufacturing space.employees. We believe our properties are in good condition anda remote work environment is currently suitable for the conduct of our business. Refer
We are a party to “Lease Commitments”a number of patent enforcement actions initiated by us against others for the infringement of our technologies, as well as proceedings brought by others against us in an attempt to invalidate certain of our patent claims. These patent-related proceedings are more fully described in Note 13 to our consolidated financial statements included in Item 8 for information regarding our outstanding lease obligations.8.
Refer to “Legal Proceedings” in Note 13 to our consolidated financial statements included in Item 8 for a discussion of current legal proceedings.
Item 4. Mine Safety Disclosures.Disclosures.
Not applicable.
Item 5. MarketMarket for the Registrant’sRegistrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
Market Information
Our common stockCommon Stock is tradedlisted on the Nasdaq Capital MarketOTCQB, an over-the-counter market, under the ticker symbol “PRKR.” The following table sets forth, for the periods indicated, the range of the high“PRKR”. Over-the-counter market quotations reflect inter-dealer prices, without retail mark-up, mark-down, or commission, and low sale prices of our common stock for the last two fiscal years, as reported by Nasdaq with prices adjusted for our one-for-ten reverse stock split that occurred on March 30, 2016. may not necessarily represent actual transactions.
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| 2016 | ||||||||
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| High |
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Quarter ended March 31 | $ | 3.80 |
| $ | 1.60 |
| $ | 4.00 |
| $ | 1.69 |
Quarter ended June 30 |
| 2.72 |
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| 1.75 |
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| 3.90 |
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| 2.19 |
Quarter ended September 30 |
| 2.24 |
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| 1.57 |
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| 8.18 |
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| 3.07 |
Quarter ended December 31 |
| 1.73 |
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| 1.02 |
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| 4.55 |
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| 1.84 |
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Holders
As of March 12, 2018,15, 2024, we had approximately 10484 holders of record and we believe there are approximately 12,8006,500 beneficial holders of our common stock.
Dividends
To date, we haveWe do not paid anycurrently pay dividends on our common stock.stock and intend to retain our cash and future earnings, if any, to fund our business plan. The payment of cash dividends in the future is atwill be dependent upon our revenue and earnings, if any, capital requirements and general financial condition. The payment of any dividends will be within the discretion of theour board of directors and will depend upon our ability to generate earnings, our capital requirements and financial condition, and other relevant factors. We do not intend to declare any dividends in the foreseeable future, but instead intend to retain all earnings, if any, for use in the business.directors.
SalesPurchases of UnregisteredEquity Securities by Issuer and Affiliated Purchasers
None.No purchases of our equity securities have been made by us or affiliated purchasers within the fourth quarter of the year ended December 31, 2023.
Issuer Repurchase of Equity SecuritiesItem 6. [Reserved].
None.
Item 6. Selected Financial Data.
Not applicable.
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Item 7. Management'sManagement's Discussion and Analysis of Financial Condition and Results of Operations.
Executive Overview
We are in the business of innovating fundamental wireless hardware and software technologies and products. We have designed and developed a consumer distributed WiFi product line that is being marketed under the brand name Milo. We also design and develop proprietary RF technologies and integrated circuits based on those technologies, and we license our technologies to others for use in wireless communication products. We have expended significant financial and other resources to research and develop our RF technologies and to obtain patent protection for those technologies in the U.S. and certain foreign jurisdictions. We believe certain patents protecting our proprietary technologies have been broadly infringed by others and therefore our business plan includesprimarily consists of enforcement of our intellectual property rights through patent licensing efforts and infringement litigationlitigation. We currently have patent enforcement actions ongoing in various U.S. district courts against mobile handset, smart television and licensing efforts.
We have a growth strategy that includes wireless product development, manufacturing and sales; and intellectual property licensing and enforcement. Our longer-term growth strategy anticipates acquisition of, or other product ventures with, companies that have businesses that are synergistic with our products and technologies, particularly in the IoT space. We have significant net operating loss (“NOL”) carryforwards that we consider a key asset of our business as these NOLs can provide shelter to over $300 million of future earnings.
Our product development and marketing efforts are primarily focused on wireless networking products for homes and small businesses. Our Milo-branded WiFi product line is a cost-effective networking system that enhances WiFi connectivity by effectively distributing the WiFi signal from existing routers and modems throughout a broader coverage area, eliminating WiFi dead zones and creating a more even distribution of data rates across the coverage area. We currently sell our WiFi products through online retailers such as Amazon.com, Walmart.com, and NeweggBusiness.com,providers, as well as through our own ecommerce web site. We also havesemiconductor suppliers, for the infringement of a direct sales effort targeting internet service providers who provide WiFi equipment to their internet service customers. In 2018, we anticipate expansionnumber of our product line as well as further expansionRF patents. We have made significant investments in developing and protecting our technologies, the returns on which are dependent upon the generation of our distribution channels. Our product expansion is expected to result both from internally-developed components, products, and features as well as through the acquisitionfuture revenues for realization.
We continue to aggressively pursue licensing opportunities with wireless communications companies that make, use or sell chipsetssemiconductors and/or products that incorporate RF. We believe there are a number of wireless communications companies that can benefit from the use of the RF technologies we have developed, whether through a license or, in certain cases, a joint product venture that may include licensing rights. From time to time, ourOur licensing efforts requireto date have required litigation in order to enforce and/or defend our intellectual property rights. Since 2011, we have been involved in patent infringement litigation against Qualcomm and subsequently others for the unauthorized use of our technology. In July 2016, we entered into a confidential patent license and settlement agreement with Samsung that resulted in the elimination of Samsung from all of our enforcement actions. Refer to “Legal Proceedings” in Note 13 to our consolidated financial statements included in Item 8 for a complete discussion of our legal proceedings. We have expended significant resources since 2011 onand incurred significant debt for the enforcement and defense of our intellectual property rights. As of December 31, 2023, we had five licensees for our technologies, including one licensee added in 2023.
Recent Developments
19On November 6, 2023, we presented oral arguments in our appeal of the ParkerVision v. Qualcomm district court rulings that ended our district court case in Orlando, Florida in March 2022. We are currently awaiting a ruling from the appellate court.
Liquidity and Capital Resources
We used cash for operationsWith the exception of $14.1 million in 2017, representing a $0.3 million, or 2%, decrease from our use of cash for operations the same period 2016. This decrease in cash usage is primarily the result of a decrease in cash used for legal expenses associated with our patent infringement litigation, largely offset by increased cash usage related to inventory expansion and other costs related to the development and launch of our WiFi networking product line.
Atyear ended December 31, 2017,2023, we had a working capital deficit of approximately $0.2 million, an increase of approximately $0.3 million compared to the same period in 2016. This increase is largely due to an increase in product and component inventory for our WiFi products of approximately $0.9 million, an increase in our prepaid assets of approximately $0.3 million and an increase in our cash, cash equivalents and restricted cash equivalents of approximately $0.2 million, partially offset by an increase of approximately $1.2 million in our current liabilities.
We have incurred significant losses from operations and negative cash flows in every year since inception, largely as a result of our significant investments in developing advanced technologies and protecting our intellectual property. ForWe have utilized the proceeds from sales of debt and equity securities and contingent funding arrangements with third parties to fund our operations, including the cost of litigation to enforce our intellectual property rights.
At December 31, 2023, we had cash and cash equivalents of approximately $2.6 million, working capital of $0.4 million, and an accumulated deficit of approximately $433.7 million. Despite the net income and cash flows generated during the year ended December 31, 2017,2023, a significant amount of future proceeds that we incurred a net loss ofmay receive from our patent enforcement and licensing programs will first be utilized to repay borrowings, legal fees, and litigation expenses under our contingent funding arrangements. In addition, we have approximately $19.3$1.5 million in convertible debt that, if not converted, will mature between June 2024 and had an accumulated deficit of approximately $371.4 million. We had cash, cash equivalents, and available-for-sale securities totaling approximately $0.4 million and restricted cash equivalents of $1.0 million at December 31, 2017.January 2025. Our independent registered public accounting firm has included in their audit report an explanatory paragraph expressing substantial doubt about our ability to continue as a going concern. See Note 2 to our consolidated financial statements included in Item 8 for a discussion of our liquidity and our ability to continue as a going concern.
We have utilizedgenerated cash from operations of approximately $10.8 million for the year ended December 31, 2023 and used cash for operations of $3.0 million for the year ended December 31, 2022. The increase in cash generated from operations from 2022 to 2023 is primarily due to proceeds received from the salespatent license and settlement agreement entered into in February 2023, net of our equity securities and our contingent funding arrangement with BKI to fund our operations, including litigation costs. In 2016, we received an aggregate of $13 million from BKI, $11 million of which was designated for use in payment of legal fees and expenses paid.
We made payments of $13.9 million on our secured contingent payment obligation during the year ended December 31, 2023, and paid approximately $0.3 million and $0.1 million in connection with certain patent infringement proceedingsother debt obligations during the years ended December 31, 2023 and $2 million of which was used for general working capital purposes. In2022, respectively. For the year ended December 2017,31, 2023, we received an additional $1aggregate proceeds from new borrowings under our secured contingent payment obligation of $5.0 million in fundingand aggregate net proceeds from BKI designated specifically for our German patent enforcement actions. BKI has a right to reimbursementissuance of convertible debt, equity financings, and compensation from gross proceeds resulting from patent enforcement and other patent monetization actions. We repaid approximately $3.3 million of this contractual obligation in 2016 from proceeds received from patent licensing and settlement agreements. As of December 31, 2017, the contingent repayment obligation to BKI is recorded at its estimated fair valueoption exercises of approximately $15.9$0.9 million, which represents management’s best estimate of the discounted cash flowscompared to be paid to BKI. Although current working capital will not be used to repay this obligation, BKI is entitled to priority payment of 100% of at least the next $10.7approximately $2.1 million in proceeds received by us from any patent-related action. Thereafter, BKI is entitled to a portionissuance of additional patent-related proceeds up to at least a specified minimum return. In addition, funds received from patent-related activities may be subject to prorated contingent payments to legal counsel.convertible debt, equity financings, and option exercises for the year ended December 31, 2022.
AlthoughSignificant portions of our litigation costs to date have been funded by contingent payment arrangements with legal counsel. Fee discounts offered by legal counsel in exchange for contingent payments upon successful outcome in our litigation are not recognized in expense until such time that the related proceeds on which the contingent fees are payable are considered probable. Contingent fees vary based on each firm’s specific fee agreement. We currently have contingent fee arrangements in place for all of our active cases. In addition to our contingent fee agreements with legal counsel, we have significantly reduced the working capital neededsecured and unsecured contingent payment obligations to fund litigation activities, the arrangements with outside counsel and BKI will reduce the net proceedsthird parties that we receivehave priority payments due from patent-related activities, including litigation awards, settlements and licenses. After deduction of priority payments to BKI, any remaining net proceeds from specific patent enforcement actions will be prorated and prioritized between us, our legal counsel, and BKI based upon a number of factors including whether the proceeds are a result of a contingently-funded action, the magnitude, nature and timing of the proceeds received, and the contingent percentage agreed to between the parties. as discussed more fully under “Financial Condition - Contingent Payment Obligations” below.
Based on our current outstanding legal proceedings, management expectsfunding arrangements and contingent payment arrangements, we estimate that up to 100% of our initial future proceeds will be used to repay contingent payment arrangements at least until the first $5.8 million of outstanding principal under our secured contingent feespayment obligation has been repaid. After repayment of $5.8 million in principal, we estimate that at least 75% of future proceeds could be payable to others could range from 25%until such time that certain minimum repayments have been achieved or our non recourse note matures in August 2028. The amount of proceeds payable to 80%others depends on the proceeding and the nature, amount and timing of the net proceeds, remaining after priority reimbursement to BKI. These contingent fees are limited to specific actions and are expected to decline following successful completion of our current phase of licensing and patent enforcement activities.among other factors.
In additionPatent enforcement litigation is costly and time-consuming, and the outcome is difficult to the proceeds from our contingent funding arrangement, we received net proceeds from the sale of equity securities of $13.7 million for the year ended December 31, 2017. These proceeds included an aggregate of approximately $12.6 million in net proceeds from the sale of approximately 6.2 million registered shares of our common stock under at-market issuance (“ATM”) sales agreements. The shares were registered under a shelf registration statement filed with the SEC in November 2016 for the offering of uppredict. We expect to $15 million in securities over a period of up to three years. As of December 31, 2017, we had remaining capacity under our ATM agreement for the sale of approximately $1.2 million in registered shares.
We also received net proceeds of approximately $1 million in 2017 under a common stock purchase agreement with Aspire Capital Fund, LLC (“Aspire”). Aspire has committed to purchase up to an aggregate of $20 million in shares of our common stock over the 30-month term of the agreement, subject to certain limitations. At December 31, 2017, Aspire had approximately $19 million remaining under the terms of the agreement.
Our ability to meet our liquidity needs for the twelve months after the issuance date of our consolidated financial statements is dependent upon one or more of (i) our ability to develop, market and sell existing and new products; (ii) our ability to successfully negotiate licensing agreements and/or settlements relating to the use of our technologies by others in excess of our contingent payment obligations to BKI and legal counsel; and/or (iii) our ability to raise additional capital from the sale of equity securities or other financing arrangements. We anticipate that we will continue to invest in patent protection, research and development, and production, selling and marketingthe support of our WiFi networking product line.patent enforcement and licensing programs. We expect that revenuecash flows generated from product sales,proceeds received from patent enforcement actions andand/or technology licenses over the twelve monthsin 2024, after the issuancededuction of our consolidated financial statementscontingent payment obligations, will not be sufficient to cover our operating expenses.expenses and debt repayment obligations. In the event we do not generate revenues, or other patent-assetpatent-related proceeds, sufficient to cover our operational costs and contingent repayment obligation,obligations, we will be required to raise additional working capital through the sale of debt or equity securities or other financing arrangements.
21
We are currently pursuing a two to three year financing transaction with third parties that may include debt, equity, in the form of common and preferred stock, or a combination thereof. There can be no assurance that we will be able to consummate a financing transaction with any of these third parties or that the terms of any such financing will be on terms and conditions that are acceptable. Until such time that we are able to consummate a longer-term financing transaction, we will continue to use the capacity available under our ATM and our common stock purchase agreement with Aspire to fund our short-term operations. The capital available to us under those financing vehicles is limited based on the remaining amounts available under our Shelf and limitations under Nasdaq rules with regards to the issuance of shares in excess of 19.99% of pre-transaction shares outstanding.
The long-term continuation of our business plan is dependent upon our ability to secure sufficient financing to support our business, and our ability to generate revenues and/or patent-related proceeds sufficient to offset expenses and meet our contingent payment obligation.obligations and other long-term debt repayment obligations. Failure to generate sufficient revenues, raise additional capital through debt or equity financings, and/or reduce operating costs could have a material adverse effect on our ability to meet our short and long-term liquidity needs and achieve our intended long-term business objectives.
Results of Operations for Each of the Years Ended December 31, 2017 and 2016Financial Condition
Intangible Assets
We use both generally accepted accounting principles (“GAAP”)consider our intellectual property, including patents, patent applications, trademarks, copyrights, and non-GAAP financial measurestrade secrets to be significant to our business. Our intangible assets are pledged as security for assessing our consolidated results of operations. The non-GAAP measures we use include Adjusted Net Loss and Adjusted Net Loss per Share. These non-GAAP measures exclude the effect on net loss and net loss per share of (i) changes in fair value of our secured contingent payment obligation and (ii) share-based compensation expense. Share-based compensation is a non-cash expense item that is subject to significant fluctuation in value based on the volatility of the market price of our common stock, and the expense recognized on a GAAP basis is not necessarily indicative of the compensation realized by our executives, employees and non-employee directors.with Brickell. The change in fairnet book value of our secured contingent payment obligation is subject to significant estimatesintangible assets was approximately $1.1 million and assumptions regarding future events and, similar to interest on long-term debt obligations, is a reflection$1.4 million as of our cost of financing rather than our operating activities. Accordingly, we consider these non-GAAP measures to provide relevant supplemental information to assist investors in better understanding our operating results. These non-GAAP measures should not be considered a substitute for, or superior to measures of financial performance prepared in accordance with GAAP.
Refer to “Reconciliation of Non-GAAP Financial Measures” in this section for a reconciliation of these non-GAAP financial measures to the most directly comparable GAAP measures for the years ended December 31, 20172023 and 2016.
Revenues2022, respectively. The cost basis for our intangible assets represents capitalized legal costs and Gross Margins
We reported licensing revenue of $0agency filing fees for securing intellectual property protection and $4 million fordoes not include the years ended December 31, 2017 and 2016, respectively as a result of a 2016 patent license and settlement agreement.costs expended in developing the underlying intellectual property. The cost of sales for licensing reflects the amortization of the licensed patent portfolio. Although we anticipate additional licensing revenue to result from our licensing and patent enforcement activities, the amount and timing is highly unpredictable and there can be no assurance that we will achieve our anticipated results.
We reported product and service revenue of $0.1 million and $0.06 million for the years ended December 31, 2017 and 2016, respectively. For the year ended December 31, 2017, our product and service revenue was primarily comprised of sales of our WiFi networking product line that began shipping in October 2017. We recognized gross margin on our WiFi product sales of approximately 25%.
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For the year ended December 31, 2016, our product and service revenue consisted primarily of engineering design services provided to third-parties and minimal IC product revenue. We recognized gross margin on our service revenue of approximately 36%. We ceased providing third-party services in 2016 in order to focus our resources on internal development of our WiFi product line. In addition, for the year ended December 31, 2017, we recorded a write down of excess IC inventory of approximately $0.1 million. We anticipate significant growth in our product revenue in 2018 as we expand our sales channels and our product offerings.
Research and Development Expenses
Research and development expenses consist primarily of engineering and related management and support personnel costs; fees for outside engineering design services which we use from time to time to supplement our internal resources; depreciation expenses related to certain assets used in product development; prototype production and materials costs for both ICs and end-user products; software licensing and support costs, which represent the annual licensing and support maintenance for engineering design and other software tools; and rent and other overhead costs for our engineering design facility. Personnel costs include share-based compensation which represents the grant date fair value of equity-based awards to our employees which is attributed to expense over the service period of the award.
Research and development costs were approximately $4.3 million for the year ended December 31, 2017 compared to approximately $3.3 million for the year ended December 31, 2016, representing an increase of approximately $1.0 million, or 30%. This increase is primarily the result of a $0.5 million increase in personnel and related overhead costs as a result of staff additions to support our recently launched networking product line. In addition, costs related to IC design and fabrication increased approximately $0.4 million as a result of development efforts towards our WiFi system on chip design.
The markets for our products and technologies are characterized by rapidly changing technology, evolving industry standards and frequent new product introductions. Our ability to successfully develop and introduce, on a timely basis, new and enhanced products and technologies will be a significant factor in our ability to grow and remain competitive. We expect to continue to invest a portion of our working capital in research and product development activities.
Selling, General, and Administrative Expenses
Selling, general and administrative expenses consist primarily of executive, director, sales and marketing, and finance and administrative personnel costs, including share-based compensation, costs incurred for advertising, insurance, shareholder relations and outside legal and professional services, including litigation expenses, and amortization and maintenance expenses related to our patent assets.
Our selling, general and administrative expenses were approximately $14.1 million for the year ended December 31, 2017, as compared to approximately $16.3 million for the year ended December 31, 2016, representing a decrease of approximately $2.2 million or 14%. This decrease is the result of a decrease in litigation fees and expenses of approximately $4.5 million, as the cost of discovery in our ITC and related actions were largely completed early in 2017. This decrease is offset by increases in personnel and related expenses of approximately $0.4 million, increases in advertising, product marketing and promotional expense of approximately $1.3 million, and increases in outside management consulting fees of approximately $0.3 million. The majority of these increases relate to personnel, advertising and other outside resources necessary for our WiFi product deployment.
23
Change in Fair Value of Contingent Payment Obligation
Our losses from the changes in fair value of our contingent payment obligation were approximately $0.7 million and $4.9 million for the years ended December 31, 2017 and 2016, respectively. We have elected to measure our secured contingent payment obligation at fair value which is based on significant unobservable inputs. We estimated the fair value of our secured contingent payment obligation using an income approach based on the estimated present value of projected future cash flows to be paid to BKI using a risk-adjusted discount rate. Changes in the significant unobservable inputs, which include estimates of the nature, timing and amount of projected future proceeds from patent-related activities, could result in significant increases or decreases in fair value from period to period.
Adjusted Net Loss and Adjusted Net Loss per Share
Adjusted net loss increased by approximately $1.9 million, or 13%, for the year ended December 31, 2017 compared to the same period in 2016. The increase in adjusted net loss is a result of the decrease in revenue from patent licensing and settlement agreements and increased costs related to the launch of our new product line, partially offset by our decreased litigation expenses. On a per share basis, our adjusted net loss per common share decreased by $0.25 per share, or 21%. This decrease is primarily the result of a 44% increase in our weighted average common shares outstanding, partially offset by the increase in our adjusted net loss.
Reconciliation of Non-GAAP Financial Measures
The following table presents a reconciliation of our net loss to the non-GAAP measure of adjusted net loss for the years ended December 31, 2017 and 2016, respectively:
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(in thousands) |
| 2017 |
| 2016 | ||
Net loss |
| $ | (19,259) |
| $ | (21,509) |
Excluded items: |
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Share-based compensation |
|
| 2,164 |
|
| 2,210 |
Change in fair value of contingent payment obligation |
|
| 711 |
|
| 4,860 |
Adjusted net loss |
| $ | (16,384) |
| $ | (14,439) |
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The following table presents a reconciliation of our net loss per common share to the non-GAAP measure of adjusted net loss per common share for the years ended December 31, 2017 and 2016, respectively:
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| 2017 |
| 2016 | ||
Basic and diluted net loss per common share |
| $ | (1.09) |
| $ | (1.76) |
Excluded items |
|
| 0.16 |
|
| 0.58 |
Adjusted net loss per common share |
| $ | (0.93) |
| $ | (1.18) |
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Critical Accounting Policies
We believe that the following are the critical accounting policies affecting the preparation of our consolidated financial statements:
Inventory
Inventory is stated at the lower of actual cost, as determined under the first-in, first-out method, or estimated net realizable value. We review our inventory for estimated obsolescence or unmarketable inventory and write down inventory for the difference between cost and estimated market value based upon assumptions about future demand. Future demand is affected by market conditions, technological obsolescence, new products and strategic plans, each of which is subject to change.
Intangible Assets
Patents, copyrights and other intangible assets areis amortized using the straight-line method over their estimated period of benefit. We estimate the economic lives of our patents and copyrights to bebenefit, generally fifteen to twenty years. We estimateThe decrease in the economic livescarrying value of otherour intangible assets including licenses, based on estimated technological obsolescence, to be two to five years, which is generally shorter thanprimarily the contractual lives.result of $0.2 million in patent amortization expense recognized in 2023 as our portfolio matures. Management evaluates the recoverability of intangible assets periodically and takes into accountconsiders events or circumstances that may warrant revised estimates of useful lives or that may indicate impairment exists. As part of our ongoing patent maintenance program, we may, from time to time, abandon a particular patent if we determine fees to maintain the patent exceed its expected recoverability. For the years ended December 31, 2023 and 2022, we incurred losses of approximately $0.06 million and $0.12 million, respectively, for the write-off of specific patent assets. These losses are included in operating expenses in the accompanying consolidated statements of comprehensive income (loss) included in Item 8.
Secured
Contingent Payment ObligationObligations
We have accounted for our secured and unsecured contingent repayment obligationpayment obligations recorded at an aggregate estimated fair value of $37.0 million and $45.8 million as long-term debt. Ourof December 31, 2023 and 2022, respectively. These repayment obligations are contingent upon the receipt of proceeds from patent enforcement and/orand other patent monetization actions. WeAs a result, we have elected to measure our securedaccount for these contingent payment obligationobligations at itstheir estimated fair value based on the variable and contingent nature of the repayment provisions. We have determined that the fair value of our secured contingent payment obligation falls within Level 3 in the fair value hierarchyvalues which involvesare subject to significant estimates and assumptions including projected future patent-related proceeds and the risk-adjusted rate for discounting future cash flows (seeas discussed in “Critical Accounting Policies” below. Refer to Note 1611 to theour consolidated financial statements included in Item 8). Actual results could differ8 for a discussion of the fair value measurement of our contingent payment obligations.
Our secured contingent payment obligation is payable to Brickell as a result of $23 million in aggregate borrowings under litigation funding arrangements initiated in 2016. As of December 31, 2023, we have repaid Brickell an aggregate of $17.3 million to date under these agreements. The contingent payment obligation to Brickell is recorded at its estimated fair market value of $29.4 million at December 31, 2023, a decrease of $11.3 million or 28% from the estimates made. Changesestimated fair market value at December 31, 2022. This decrease in fair value includingis primarily the component relatedresult of $13.9 million in repayments, along with renegotiation of future repayment arrangements with Brickell in 2023, offset by $5.0 million in new borrowings and continued increases in accrued interest payable to imputedBrickell.
Brickell is entitled to the first $5.8 million in proceeds received by us, net of contingent legal fees, from any patent-related actions. Thereafter, Brickell is entitled to a prorated percentage of net proceeds. The underlying carrying value of the contingent payment obligation is represented by a non recourse note with a face value of $45.5 million, plus accrued interest of approximately $5.5 million as of December 31, 2023. The note matures on August 14, 2028. If our repayments to Brickell are included ininsufficient to repay the consolidated statementsface value of comprehensive lossthe note plus accrued interest by the maturity date, our remaining repayment obligations under the heading “Changenote will be reduced to zero with future payment obligations, if any, being determined under a separate prepaid forward purchase agreement that entitles Brickell to a specified percentage of monetary recoveries resulting from patent-related actions to the extent not already paid to Brickell under the note or previous litigation funding agreements.
In addition, we have incurred unsecured contingent payment obligations in connection with various funding arrangements. These contingent payment obligations are payable from our share of patent-related proceeds after satisfaction of our obligation to Brickell and payment of contingent fees to legal counsel. These unsecured contingent payment obligations are recorded at an aggregate estimated fair value of $7.6 million at December 31, 2023, representing an increase of $2.5 million from the estimated fair market value at December 31, 2022. This increase is primarily the result of changes in the estimated amounts and timing of projected future cash flows due to changes in probabilities and time frames based on the status of various patent infringement actions. The maximum payment obligation for our unsecured contingent payment obligation.”obligations is $10.8 million at December 31, 2023.
Revenue Recognition
We derive revenue from licensingSee “Change in Fair Value of Contingent Obligations” included in “Results of Operations” below for a discussion of the changes in the estimated fair values of our intellectual property, settlements from patent infringement disputes, salessecured and unsecured contingent payment obligations.
Note Payable
As of products, and engineering services.December 31, 2023, we have a $0.5 million unsecured note payable to Sterne, Kessler, Goldstein, & Fox, PLLC (“SKGF”), a related party. The timingnote calls for monthly payments of revenue recognition and$12,500 through March 2027 with a final payment of approximately $0.02 million in April 2027. Failure to comply with the amount of revenue recognized depends upon a variety of factors, including the specificpayment terms of each arrangementthis note constitutes an event of default which, if uncured, will result in the entire unpaid principal balance of the note and any unpaid, accrued interest to become immediately due and payable. In addition, an event of default results in an increase in the natureinterest rate under the notes to a default rate of 12% per annum. Notes payable are discussed more fully in Note 8 to our deliverables and obligations. In general, we recognize revenue when there is persuasive evidence of an arrangement, the amounts are fixed and determinable and the collectability is reasonably assured.consolidated financial statements included in Item 8.
Revenue from the sale
Convertible Notes
As of December 31, 2023, we have $4.9 million in notes that are convertible, at the time of shipment to the customer or when the other criteria for revenue recognition are met, if later. Unearned revenue generally consists of product inventory held by a distributor. Revenue from the sale of our products includes shipping and handling charged to the customer. Product revenue is recorded net of sales tax collected from customers, discounts, and actual and estimated future returns.
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The consideration received from patent license and settlement agreements is allocated to the various elements of the arrangement to the extent the revenue recognition differs between the elements of the arrangement. Elements related to past and future royalties as well as elements related to settlement will be recorded as revenue in our consolidated statements of comprehensive loss when earned. We recognize revenues upon execution of a patent license and settlement agreement by both parties provided that the amounts are fixed and determinable, there are no significant undelivered obligations and collectability is reasonably assured. We do not recognize any revenue prior to the execution of an agreement as there is no reliable basis on which we can estimate the amounts related to the elements of the arrangement, or assess collectability. In addition, we do not recognize as revenue any consideration in the agreement that is contingent upon the occurrence of future events until such time that those future events occur.
Accounting for Share-Based Compensation
We calculate the fair value of share-based equity awards to employees, including restricted stock, stock options and restricted stock units, on the date of grant and recognize the calculated fair value as compensation expense over the requisite service periods of the related awards. The fair value of stockholders’ option, awards is determined using the Black-Scholes option valuation model which requires the use of highly subjective assumptions and estimates including how long employees will retain their stock options before exercising them and the volatilityinto shares of our common stock price over the expected lifeat fixed conversion prices ranging from $0.08 to $0.25 per share. These notes mature at varying dates from June 2024 to January 2028. The majority of the equity award. Changesnotes bear interest at a stated rate of 8%, payable quarterly. We have the option, subject to certain conditions, to pay the quarterly interest in-kind with shares of our common stock based on market price at the interest payment date. To date, all of the interest payments under these convertible notes have been paid in-kind and we anticipate that future payments of interest will also be paid in-kind. The notes provide for events of default that include failure to pay principal or interest when due, breach of any of the representations made by us, events of liquidation or bankruptcy, and a change in these subjective assumptions can materially affectcontrol. In the estimateevent of fair valuedefault, the interest rate increases to 12% per annum and the outstanding principal balance of share-based compensation and consequently, the related amount recognized as expensenotes plus all accrued interest due may be declared immediately payable by the holders of a majority of the then-outstanding notes. Our convertible notes payable are more fully discussed in theNote 9 to our consolidated financial statements of comprehensive loss. included in Item 8.
Income TaxesDeferred Tax Assets and Related Valuation Allowance
The provision for income taxes is based on loss before taxes as reported in the consolidated statements of comprehensive loss. Deferred tax assets and liabilities are recognized for the expected future tax consequences of events that have been included in the financial statements or tax returns. Deferred tax assets and liabilities are determined based on differences between the financial statement carrying amounts and the tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Valuation allowances are established to reduce deferred tax assets when, based on available objective evidence, it is more likely than not that the benefit of such assets will not be realized. OurAs of December 31, 2023, we had net deferred tax assets exclude unrecognizedof approximately $83.7 million, primarily related to our NOL carryforwards, which were fully offset by a valuation allowance due to the uncertainty related to realization of these assets through future taxable income. In addition, our ability to benefit from our NOL and other tax benefits which do not meetcredit carryforwards could be limited under Section 382 as more fully discussed in “Risk Factors” and in Note 12 to our consolidated financial statements included in Item 8.
Results of Operations for Each of the Years Ended December 31, 2023 and 2022
Revenues and Gross Margins
Licensing revenue was $25.00 million and $0.93 million for the years ended December 31, 2023 and December 31, 2022, respectively. Our licensing revenue is from patent licensing and settlement agreements resulting from patent enforcement actions filed by us. To date, all of our license and settlement agreements have consisted of a more-likely-than-not threshold for financial statement recognition for tax positions taken orone-time, lump sum payment with no recurring future revenue. We recognized revenue from each contract when the parties’ performance obligations were met. Cost of sales related to the licensing revenue consists of amortization expense related to the patents covered under the license agreements. Our licensing revenue is expected to be taken in a tax return.vary based on the market size of the licensee and the specific terms of the license and settlement agreement.
Our licensing proceeds in 2023 were used to pay contingent out-of-pocket expenses and fees incurred by our litigation counsel and to repay a portion of our secured contingent payment obligations. Our licensing proceeds in 2022 were fully used to pay contingent out-of-pocket expenses incurred by our litigation counsel and therefore did not have an impact on our cash flows from operations. The contingent out-of-pocket expenses, which are recognized in the same period as the corresponding revenue, are included in selling, general and administrative expenses.
Although we anticipate additional revenue to result from our licensing and patent enforcement actions, the amount and timing is highly unpredictable and there can be no assurance that we will achieve our anticipated results.
Selling, General, and Administrative Expenses
Selling, general and administrative expenses consist primarily of executive, director, technical support, and finance and administrative personnel costs, including share-based compensation, costs incurred for insurance, shareholder relations and outside legal and professional services, including litigation expenses, and amortization and maintenance expenses related to our patent assets.
Our selling, general and administrative expenses were approximately $14.7 million for the year ended December 31, 2023, as compared to approximately $7.8 million for the year ended December 31, 2022, representing an increase of approximately $7.0 million or 90%. This increase results primarily from a $9.6 million increase in litigation fees and expenses and is partially offset by a decrease in share-based compensation of $2.6 million attributed to nonqualified stock options and restricted stock units becoming fully vested during the year ended December 31, 2022. We recognized approximately $11.1 million and $0.9 million in contingent litigation expenses resulting from patent license and settlement arrangements for the years ended December 31, 2023 and December 31, 2022, respectively. The contingent legal fees and expenses recognized are generally proportionate to the amount of gross proceeds received from our confidential patent license and settlement agreements.
Change in Fair Value of Contingent Payment Obligations
We have elected to measure our secured and unsecured contingent payment obligations at fair value which is based on significant unobservable inputs. We estimated the fair value of our secured contingent payment obligations using a probability-weighted income approach based on the estimated present value of projected future cash outflows using a risk-adjusted discount rate. Increases or decreases in the significant unobservable inputs could result in significant increases or decreases in fair value. Generally, changes in fair value are a result of changes in estimated amounts and timing of projected future cash flows due to increases in funded amounts, passage of time, and changes in the probabilities based on the status of the funded actions.
For the year ended December 31, 2023, we recorded a net increase in the aggregate fair value of our secured and unsecured contingent payment obligations of approximately $0.1 million. The majority of the change in fair value is attributable to changes in the estimated amounts and timing of projected future cash flows due to changes in probabilities and time frames based on the status of various patent infringement actions, as well as the impact of revised funding agreements with Brickell.
Critical Accounting Policies
We believe that the following are critical accounting policies and estimates that significantly impact the preparation of our consolidated financial statements:
Contingent Payment Obligations
We have accounted for our secured and unsecured contingent payment obligations as long-term debt. Our repayment obligations are contingent upon the receipt of proceeds from patent enforcement or other patent monetization actions. We have elected to measure our contingent payment obligations at their estimated fair values based on the variable and contingent nature of the repayment provisions. We have determined that the fair value of our secured and unsecured contingent payment obligations falls within Level 3 in the fair value hierarchy, which involves significant estimates and assumptions including projected future patent-related proceeds and the risk-adjusted rate for discounting future cash flows. Actual results could differ from the estimates made. Changes in fair value, including the component related to imputed interest, are included in the consolidated statements of comprehensive income (loss) under the heading “Change in fair value of contingent payment obligations.” Refer to Note 11 to our consolidated financial statements included in Item 8 for a discussion of the significant estimates and assumptions used in estimating the fair value of our contingent payment obligations.
Accounting for Share-Based Compensation
We calculate the fair value of share-based equity awards, including restricted stock, stock options and restricted stock units (“RSUs”), on the date of grant and recognize the calculated fair value as compensation expense over the requisite service periods of the related awards. The fair value of stock option awards is determined using the Black-Scholes option valuation model that requires the use of highly subjective assumptions and estimates including how long the holder will retain their stock options before exercising them and the volatility of our common stock price over the expected life of the equity award. Changes in these subjective assumptions can materially affect the estimate of fair value of share-based compensation and consequently, the related amount recognized as expense in the consolidated statements of comprehensive income (loss).
New Accounting Pronouncements
There have been no new accounting pronouncements that are expected to have a material impact on our financial position, results of operations or cash flows when they become effective.
Off-Balance Sheet Transactions and Contractual Obligations
As of December 31, 2017,2023, we had outstanding warrants to purchase 0.410.3 million shares of our common stock. The estimated grant date fair value of these warrants of approximately $0.8$3.5 million is included in shareholders’ (deficit) equitydeficit in our consolidated balance sheets.sheet for the year ended December 31, 2023. The outstanding warrants have an average exercise price of $2.21$0.75 per share and a weighted average remaining life of approximately three years (See “Common Stock Warrants” in Note 11 to the consolidated financial statements included in 1.5 years.
Item 8).7A. Quantitative and Qualitative Disclosures About Market Risk.
Not applicable.
26
Our contractual obligations and commercial commitments at December 31, 2017 were as follows, in thousands (see “Lease Commitments” in Note 13 to the consolidated financial statements included in Item 8):
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| Payments due by period | |||||||||||||
Contractual Obligations: | Total |
| 1 year or less |
| 2 – 3 years |
| 4 – 5 years |
| After 5 years | |||||
Operating leases | $ | 1,092 |
| $ | 372 |
| $ | 375 |
| $ | 345 |
| $ | - |
Capital leases |
| 5 |
|
| 2 |
|
| 3 |
|
| - |
|
| - |
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Item 7A. Quantitative and Qualitative Disclosures about Market Risk.
Our cash equivalents and restricted cash equivalents, which are primarily highly liquid money market instruments, and our available-for-sale securities, which are mutual funds invested primarily in short-term municipal securities, are subject to market risk, including interest rate risk. Market risk is the risk of loss arising from adverse changes in market and economic conditions and is directly influenced by the volatility and liquidity in the markets in which the related underlying assets are traded. We are averse to principal loss and seek to ensure the safety and preservation of our funds by investing in market instruments with limited market risk. Accordingly, we do not believe there is any material market risk exposure with respect to our market instruments.
27
Item 8. Financial Statements and Supplementary Data.
Index to Consolidated Financial Statements | ||
Page | ||
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM (for the years ended December 31, 2023 and 2022) (PCAOB ID: 569) |
| |
FINANCIAL STATEMENTS: | ||
Consolidated Balance Sheets |
| |
| ||
| ||
Consolidated Statements of Cash Flows - for the years ended December 31, |
| |
Notes to Consolidated Financial Statements - December 31, |
| |
SUPPLEMENTARY DATA: | ||
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| |
| ||
| ||
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Shareholders
Shareholders of ParkerVision, Inc.
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidatedbalance sheetsof ParkerVision, Inc. (the “Company”) and its subsidiary (“the Company”) as of December 31, 20172023 and 2016,2022, andthe related consolidated statements of comprehensive loss, shareholders (deficit) equityincome (loss), shareholders’ deficit and cash flows for each of the years thenin the two-year period ended,including December 31, 2023, and the related notes and financial statement schedulelisted in the accompanying index (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company and its subsidiary as of December 31, 20172023 and 2016,2022, and the results of itstheiroperations and itstheircash flows for each of the years thenin the two-year period ended December 31, 2023 in conformity with accounting principles generally accepted in the United States of America.
Substantial Doubt About the Company’sEntity's Ability to Continue as a Going Concern
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the consolidated financial statements, the Company's current resources are not sufficient to meet their liquidity needs for the next twelve months, the Company has historically suffered recurring losses from operations, and negative cash flows has a net capital deficiency that raise substantial doubt about its ability to continue as a going concern. Management'sManagement’s evaluation of the events and conditions and management's plans in regard to theseregarding those matters are also described in Note 2. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. Our opinion is not modified with respect to this matter.
Basis for Opinion
These consolidatedfinancial statements are the responsibility of the Company'sCompany’s management. Our responsibility is to express an opinion on the Company’s consolidatedfinancial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits of these consolidatedfinancial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As a part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company'sCompany’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the consolidatedfinancial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidatedfinancial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
Estimation of Fair Value of Contingent Payment Obligations
As disclosed in Note 1 of the Company’s consolidated financial statements, the Company accounts for their secured and unsecured contingent payment obligations as long-term debt. Their payment obligations are contingent upon the receipt of proceeds from patent enforcement and/or patent monetization actions. The Company has elected to measure their contingent payment obligations at their estimated fair values. The Company recorded the fair value of their contingent payment obligations at approximately $37,020,000 as of December 31, 2023.
Auditing management’s estimate of the fair value of their contingent payment obligations involved subjective evaluation and a high degree of auditor judgement due to significant assumptions involved in estimating the receipt of proceeds from patent enforcement and/or patent monetization actions.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. We obtained an understanding and evaluated the design of internal controls that address the risks of material misstatement relating to recording the contingent payment obligations at fair value. We tested the accuracy and completeness of the underlying data used in calculating the fair value. We evaluated management’s ability to accurately estimate the assumptions used to develop the fair value of the contingent payment obligations. We also involved an independent legal firm to assist in evaluating the reasonableness of the assumptions of future litigation outcomes used by the Company in estimating the receipt of proceeds from patent enforcement and/or patent monetization actions.
/s/ PricewaterhouseCoopers LLP
Certified Public Accountants
Jacksonville, Florida
March 29, 2018MSL, P.A.
We have served as the Company'sCompany’s auditor since 1999.2019.
Fort Lauderdale, Florida
March 21, 2024
29
CONSOLIDATED BALANCE SHEETS
FOR THE YEARS ENDED DECEMBERDecember 31, 2017 AND 20162023 and 2022
(in thousands, except par value data)thousands)
2023 | 2022 | |||||||
CURRENT ASSETS: | ||||||||
Cash and cash equivalents | $ | 2,560 | $ | 109 | ||||
Prepaid expenses | 61 | 244 | ||||||
Other current assets | 34 | 30 | ||||||
Total current assets | 2,655 | 383 | ||||||
Intangible assets, net | 1,055 | 1,359 | ||||||
Other assets, net | 313 | 9 | ||||||
Total assets | $ | 4,023 | $ | 1,751 | ||||
CURRENT LIABILITIES: | ||||||||
Accounts payable | $ | 573 | $ | 901 | ||||
Accrued expenses: | ||||||||
Salaries and wages | 23 | 23 | ||||||
Professional fees | 67 | 79 | ||||||
Other accrued expenses | 447 | 490 | ||||||
Convertible notes, current portion | 1,045 | 625 | ||||||
Related party note payable, current portion | 134 | 139 | ||||||
Total current liabilities | 2,289 | 2,257 | ||||||
LONG-TERM LIABILITIES: | ||||||||
Secured contingent payment obligation | 29,402 | 40,708 | ||||||
Unsecured contingent payment obligations | 7,618 | 5,089 | ||||||
Convertible notes, net of current portion | 3,893 | 3,913 | ||||||
Related party note payable, net of current portion | 340 | 473 | ||||||
Total long-term liabilities | 41,253 | 50,183 | ||||||
Total liabilities | 43,542 | 52,440 | ||||||
COMMITMENTS AND CONTINGENCIES | ||||||||
SHAREHOLDERS' DEFICIT: | ||||||||
Common stock, $.01 par value, 175,000 shares authorized, 87,681 and 81,246 issued and outstanding at December 31, 2023 and 2022, respectively | 877 | 812 | ||||||
Additional paid-in capital | 393,314 | 391,724 | ||||||
Accumulated deficit | (433,710 | ) | (443,225 | ) | ||||
Total shareholders' deficit | (39,519 | ) | (50,689 | ) | ||||
Total liabilities and shareholders' deficit | $ | 4,023 | $ | 1,751 | ||||
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|
| 2017 |
| 2016 | ||
CURRENT ASSETS: |
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|
|
Cash and cash equivalents | $ | 354 |
| $ | 258 |
Restricted cash equivalents |
| 1,000 |
|
| 911 |
Available-for-sale securities |
| 26 |
|
| 14 |
Accounts receivable, net of allowance for doubtful accounts of $3 and $4 at December 31, 2017 and 2016, respectively |
| 27 |
|
| 1 |
Inventories, net |
| 1,025 |
|
| 170 |
Prepaid expenses and other |
| 1,011 |
|
| 685 |
Total current assets |
| 3,443 |
|
| 2,039 |
|
|
|
|
|
|
Property and equipment, net |
| 376 |
|
| 269 |
Intangible assets, net |
| 5,076 |
|
| 6,268 |
Other assets, net |
| 15 |
|
| - |
Total assets | $ | 8,910 |
| $ | 8,576 |
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|
|
CURRENT LIABILITIES: |
|
|
|
|
|
Accounts payable | $ | 678 |
| $ | 595 |
Accrued expenses: |
|
|
|
|
|
Salaries and wages |
| 376 |
|
| 297 |
Professional fees |
| 2,054 |
|
| 455 |
Other accrued expenses |
| 225 |
|
| 267 |
Note payable, current portion |
| 294 |
|
| 825 |
Deferred rent, current portion |
| 13 |
|
| 51 |
Deferred revenue |
| 19 |
|
| 19 |
Total current liabilities |
| 3,659 |
|
| 2,509 |
|
|
|
|
|
|
LONG-TERM LIABILITIES: |
|
|
|
|
|
Capital lease, net of current portion |
| 2 |
|
| - |
Deferred rent, net of current portion |
| 66 |
|
| 1 |
Note payable, net of current portion |
| 531 |
|
| - |
Secured contingent payment obligation |
| 15,896 |
|
| 14,185 |
Total long-term liabilities |
| 16,495 |
|
| 14,186 |
Total liabilities |
| 20,154 |
|
| 16,695 |
|
|
|
|
|
|
COMMITMENTS AND CONTINGENCIES |
|
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|
SHAREHOLDERS' (DEFICIT) EQUITY: |
|
|
|
|
|
Common stock, $.01 par value, 30,000 shares authorized, 21,222 and 13,183 issued and outstanding at December 31, 2017 and 2016, respectively |
| 212 |
|
| 132 |
Warrants outstanding |
| 826 |
|
| 826 |
Additional paid-in capital |
| 359,141 |
|
| 343,087 |
Accumulated deficit |
| (371,423) |
|
| (352,164) |
Total shareholders' (deficit) equity |
| (11,244) |
|
| (8,119) |
Total liabilities and shareholders' (deficit) equity | $ | 8,910 |
| $ | 8,576 |
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|
|
The accompanying notes are an integral part of these consolidated financial statements.
30
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSSINCOME (LOSS)
FOR THE YEARS ENDED DECEMBERDecember 31, 2017 AND 20162023 and 2022
(in thousands)thousands, except per share amounts)
2023 | 2022 | |||||||
Licensing revenue | $ | 25,000 | $ | 925 | ||||
Cost of sales | (227 | ) | (10 | ) | ||||
Gross margin | 24,773 | 915 | ||||||
Selling, general, and administrative expenses | 14,744 | 7,773 | ||||||
Total operating expenses | 14,744 | 7,773 | ||||||
Interest and other income | 58 | 103 | ||||||
Interest and other expense | (424 | ) | (324 | ) | ||||
Change in fair value of contingent payment obligations | (148 | ) | (2,734 | ) | ||||
Total interest and other | (514 | ) | (2,955 | ) | ||||
Net income (loss) before income tax | 9,515 | (9,813 | ) | |||||
Provision for income taxes | - | - | ||||||
Net income (loss) | 9,515 | (9,813 | ) | |||||
Other comprehensive income, net of tax | - | - | ||||||
Comprehensive income (loss) | $ | 9,515 | $ | (9,813 | ) | |||
Earnings (loss) per common share | ||||||||
Basic | $ | 0.11 | $ | (0.13 | ) | |||
Diluted | $ | 0.08 | $ | (0.13 | ) | |||
Weighted average common shares outstanding | ||||||||
Basic | 85,732 | 78,395 | ||||||
Diluted | 119,888 | 78,395 | ||||||
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|
| 2017 |
| 2016 |
| ||
Licensing revenue | $ | - |
| $ | 4,000 |
|
Product and service revenue |
| 100 |
|
| 64 |
|
Total revenue |
| 100 |
|
| 4,064 |
|
|
|
|
|
|
|
|
Cost of sales - licensing |
| - |
|
| 301 |
|
Cost of sales - product and service |
| 75 |
|
| 41 |
|
Write down of obsolete inventory |
| 125 |
|
| - |
|
Gross margin |
| (100) |
|
| 3,722 |
|
|
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|
|
|
|
|
Research and development expenses |
| 4,344 |
|
| 3,343 |
|
Selling, general, and administrative expenses |
| 14,061 |
|
| 16,318 |
|
Total operating expenses |
| 18,405 |
|
| 19,661 |
|
|
|
|
|
|
|
|
Interest and other income |
| 26 |
|
| 18 |
|
Interest expense |
| (69) |
|
| (68) |
|
Change in fair value of contingent payment obligation (Note 8) |
| (711) |
|
| (4,860) |
|
Total interest and other |
| (754) |
|
| (4,910) |
|
|
|
|
|
|
|
|
Net loss before income tax |
| (19,259) |
|
| (20,849) |
|
|
|
|
|
|
|
|
Foreign income tax expense |
| - |
|
| (660) |
|
|
|
|
|
|
|
|
Net loss |
| (19,259) |
|
| (21,509) |
|
|
|
|
|
|
|
|
Other comprehensive income (loss), net of tax |
| - |
|
| - |
|
|
|
|
|
|
|
|
Comprehensive loss | $ | (19,259) |
| $ | (21,509) |
|
|
|
|
|
|
|
|
Basic and diluted net loss per common share | $ | (1.09) |
| $ | (1.76) |
|
|
|
|
|
|
|
|
Weighted average common shares outstanding |
| 17,688 |
|
| 12,244 |
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these consolidated financial statements.
31
CONSOLIDATED STATEMENTS OF SHAREHOLDERS (DEFICIT) EQUITYSHAREHOLDERS’ DEFICIT
FOR THE YEARS ENDED DECEMBERDecember 31, 2017 AND 20162023 and 2022
(in thousands)
Common Stock, Par Value | Additional Paid-in Capital | Accumulated Deficit | Total Shareholders' Deficit | |||||||||||||
Balance as of December 31, 2021 | $ | 770 | $ | 387,865 | $ | (433,412 | ) | $ | (44,777 | ) | ||||||
Issuance of common stock and warrants in public and private offerings, net of issuance costs | 20 | 362 | - | 382 | ||||||||||||
Issuance of common stock upon exercise of options and warrants | 5 | 78 | - | 83 | ||||||||||||
Issuance of common stock and warrants for services | 2 | 57 | - | 59 | ||||||||||||
Issuance of common stock upon conversion and payment of interest in kind on convertible debt | 14 | 282 | - | 296 | ||||||||||||
Share-based compensation, net of shares withheld for taxes | 1 | 3,080 | - | 3,081 | ||||||||||||
Net loss for the year | - | - | (9,813 | ) | (9,813 | ) | ||||||||||
Balance as of December 31, 2022 | 812 | 391,724 | (443,225 | ) | (50,689 | ) | ||||||||||
Issuance of common stock and warrants in public and private offerings, net of issuance costs | 8 | 422 | - | 430 | ||||||||||||
Issuance of common stock upon exercise of options and warrants | 1 | 3 | - | 4 | ||||||||||||
Issuance of common stock, warrants, and options for services | 5 | 122 | - | 127 | ||||||||||||
Issuance of common stock upon conversion and payment of interest in kind on convertible debt | 49 | 542 | - | 591 | ||||||||||||
Share-based compensation, net of shares withheld for taxes | 2 | 501 | - | 503 | ||||||||||||
Net income for the year | - | - | 9,515 | 9,515 | ||||||||||||
Balance as of December 31, 2023 | $ | 877 | $ | 393,314 | $ | (433,710 | ) | $ | (39,519 | ) | ||||||
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|
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|
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|
|
|
|
| Common Stock, Par Value |
|
| Warrants |
| Additional |
| Accumulated |
| Total | |||||
Balance as of December 31, 2015 |
| $ | 110 |
|
| $ | 1,300 |
| $ | 335,528 |
| $ | (330,655) |
| $ | 6,283 |
Issuance of common stock and warrants in public and private offerings |
|
| 16 |
|
|
| 335 |
|
| 3,785 |
|
| - |
|
| 4,136 |
Issuance of common stock upon exercise of options and warrants |
|
| 1 |
|
|
| (912) |
|
| 1,333 |
|
| - |
|
| 422 |
Issuance of common stock for services |
|
| 3 |
|
|
| - |
|
| 427 |
|
| - |
|
| 430 |
Share-based compensation, net of shares withheld for taxes |
|
| 2 |
|
|
| 103 |
|
| 2,014 |
|
| - |
|
| 2,119 |
Comprehensive loss for the year |
|
| - |
|
|
| - |
|
| - |
|
| (21,509) |
|
| (21,509) |
Balance as of December 31, 2016 |
|
| 132 |
|
|
| 826 |
|
| 343,087 |
|
| (352,164) |
|
| (8,119) |
Issuance of common stock and warrants in public and private offerings |
|
| 73 |
|
|
| - |
|
| 13,606 |
|
| - |
|
| 13,679 |
Issuance of common stock for services |
|
| 3 |
|
|
| - |
|
| 422 |
|
| - |
|
| 425 |
Share-based compensation, net of shares withheld for taxes |
|
| 4 |
|
|
| - |
|
| 2,026 |
|
|
|
|
| 2,030 |
Comprehensive loss for the year |
|
| - |
|
|
| - |
|
| - |
|
| (19,259) |
|
| (19,259) |
Balance as of December 31, 2017 |
| $ | 212 |
|
| $ | 826 |
| $ | 359,141 |
| $ | (371,423) |
| $ | (11,244) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these consolidated financial statements.
32
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBERDecember 31, 2017 AND 20162023 and 2022
(in thousands)
2023 | 2022 | |||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
Net income (loss) | $ | 9,515 | $ | (9,813 | ) | |||
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: | ||||||||
Depreciation and amortization | 256 | 311 | ||||||
Share-based compensation | 503 | 3,081 | ||||||
Change in fair value of contingent payment obligations | 148 | 2,734 | ||||||
Loss on disposal/impairment of equipment and intangible assets | 55 | 124 | ||||||
Paid in kind interest expense | 402 | 299 | ||||||
Changes in operating assets and liabilities: | ||||||||
Prepaid expenses and other assets | 306 | 396 | ||||||
Accounts payable and accrued expenses | (394 | ) | (91 | ) | ||||
Total adjustments | 1,276 | 6,854 | ||||||
Net cash provided by (used in) operating activities | 10,791 | (2,959 | ) | |||||
CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
Purchases of property and equipment | (2 | ) | (4 | ) | ||||
Net cash used in investing activities | (2 | ) | (4 | ) | ||||
CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
Net proceeds from issuance of common stock in private offerings | 121 | 382 | ||||||
Net proceeds from exercise of options and warrants | 4 | 83 | ||||||
Net proceeds from debt financings | 800 | 1,668 | ||||||
Proceeds from contingent payment obligation | 5,000 | - | ||||||
Repayment of contingent payment obligation | (13,925 | ) | - | |||||
Principal payments on long-term debt | (338 | ) | (91 | ) | ||||
Net cash (used in) provided by financing activities | (8,338 | ) | 2,042 | |||||
NET CHANGE IN CASH AND CASH EQUIVALENTS | 2,451 | (921 | ) | |||||
CASH AND CASH EQUIVALENTS, beginning of year | 109 | 1,030 | ||||||
CASH AND CASH EQUIVALENTS, end of year | $ | 2,560 | $ | 109 | ||||
SUPPLEMENTAL CASH FLOW INFORMATION: | ||||||||
Cash paid for interest | $ | 24 | $ | 24 | ||||
Cash paid for income taxes | $ | - | $ | - | ||||
|
|
|
|
|
|
|
|
|
|
|
|
| 2017 |
| 2016 | ||
CASH FLOWS FROM OPERATING ACTIVITIES: |
|
|
|
|
|
Net loss | $ | (19,259) |
| $ | (21,509) |
Adjustments to reconcile net loss to net cash used in |
|
|
|
|
|
Depreciation and amortization |
| 1,301 |
|
| 1,375 |
Share-based compensation |
| 2,164 |
|
| 2,210 |
Loss on disposal of equipment and other assets |
| 85 |
|
| 257 |
Write down of obsolete inventory |
| 125 |
|
| - |
Realized (gain) loss on available-for-sale securities |
| (9) |
|
| 1 |
Changes in fair value of contingent payment obligation |
| 711 |
|
| 4,860 |
Changes in operating assets and liabilities: |
|
|
|
|
|
Accounts receivable |
| (26) |
|
| 3 |
Inventories |
| (980) |
|
| 1 |
Prepaid expenses and other |
| 84 |
|
| (33) |
Accounts payable and accrued expenses |
| 1,717 |
|
| (1,453) |
Deferred rent |
| 27 |
|
| (74) |
Deferred revenue |
| - |
|
| (2) |
Total adjustments |
| 5,199 |
|
| 7,145 |
Net cash used in operating activities |
| (14,060) |
|
| (14,364) |
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES: |
|
|
|
|
|
Purchase of available-for-sale securities |
| (4,813) |
|
| (4,405) |
Proceeds from redemption of available-for-sale securities |
| 4,810 |
|
| 6,180 |
Proceeds from sale of assets |
| 18 |
|
| - |
Purchases of property and equipment |
| (252) |
|
| (6) |
Payments for patent costs and other intangible assets |
| (61) |
|
| (153) |
Net cash (used in) provided by investing activities |
| (298) |
|
| 1,616 |
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES: |
|
|
|
|
|
Net proceeds from issuance of common stock in |
|
|
|
|
|
public and private offerings |
| 13,679 |
|
| 3,801 |
Net proceeds from exercise of options and warrants |
| - |
|
| 422 |
Shares withheld for payment of taxes |
| (134) |
|
| (90) |
Proceeds from contingent payment obligation |
| 1,000 |
|
| 13,000 |
Repayment of contingent payment obligation |
| - |
|
| (3,340) |
Principal payments on capital lease obligation |
| (2) |
|
| (52) |
Net cash provided by financing activities |
| 14,543 |
|
| 13,741 |
|
|
|
|
|
|
NET CHANGE IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH EQUIVALENTS |
| 185 |
|
| 993 |
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH EQUIVALENTS, beginning of year |
| 1,169 |
|
| 176 |
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH EQUIVALENTS, end of year | $ | 1,354 |
| $ | 1,169 |
|
|
|
|
|
|
SUPPLEMENTAL CASH FLOW INFORMATION: |
|
|
|
|
|
Cash paid for interest | $ | 69 |
| $ | 62 |
Cash paid for income taxes | $ | - |
| $ | 660 |
SUPPLEMENTAL SCHEDULE OF NON-CASH ACTIVITIES: |
|
|
|
|
|
Purchase of equipment under capital lease (Note 6) | $ | 6 |
| $ | - |
|
|
|
|
|
|
The accompanying notes are an integral part of these consolidated financial statements.
33
PARKERVISION,PARKERVISION, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBERDecember 31, 20172023 and 20162022
1.SIGNIFICANT ACCOUNTING POLICIES
1. THE COMPANY AND NATURE OF BUSINESS
ParkerVision, Inc. and its wholly-owned German subsidiary, ParkerVision GmbH (collectively “ParkerVision”, “we” or the “Company”) is in the business of innovating fundamental wireless hardware and software technologies and products. We have determined that our business currently operates under a single operating and reportable segment.
We have designed and developed a consumer distributed WiFi product line that is being marketed under the brand name Milo®. We also design and develop our proprietary radio frequency (“RF”) technologies and integrated circuits based on those technologies, and we license our technologies to others for use in semiconductor circuits for wireless communication products. We have expended significant financial and other resources to research and develop our RF technologies and to obtain patent protection for those technologies in the United States of America (“U.S.”) and certain foreign jurisdictions. We believe certain patents protecting our proprietary technologies have been broadly infringed by others, and therefore the primary focus of our business plan includesis the enforcement of our intellectual property rights through patent licensing and infringement litigation and licensing efforts. We have determined that our business currently operates under a single operating and reportable segment.
2. LIQUIDITY AND GOING CONCERN
The accompanying consolidated financial statements as of and for the year ended December 31, 2017 were prepared assuming we will continue as a going concern, which contemplates that we will continue in operation and will be able to realize our assets and settle our liabilities and commitments in the normal course of business for a period of at least one year from the issuance date of these financial statements. These consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that could result should we be unable to continue as a going concern.
We have incurred significant losses from operations and negative cash flows in every year since inception and have utilized the proceeds from the sales of our equity securities and our contingent funding arrangements with third-parties to fund our operations, including our litigation costs. For the year ended December 31, 2017, we incurred a net loss of approximately $19.3 million and negative cash flows from operations of approximately $14.1 million. At December 31, 2017, we had a working capital deficit of approximately $0.2 million and an accumulated deficit of approximately $371.4 million. These circumstances raise substantial doubt about our ability to continue to operate as a going concern for a period of one year after the issuance date of these consolidated financial statements.
At December 31, 2017, we had cash, cash equivalents and available for sale securities of approximately $0.4 million and restricted cash equivalents of $1.0 million. Additionally, we began shipments of our WiFi networking product line in October 2017. Although we anticipate growth in revenues and margin generated by this product line will reduce our net losses in 2018, sales of our WiFi product line will not be sufficient to fund our operations without the need for additional working capital. In addition, although we may receive proceeds from our patent enforcement actions ongoing in 2018,various U.S. district courts against mobile handset, smart television and other WiFi product providers, as well as semiconductor suppliers, for the timinginfringement of a number of our RF patents. We have made significant investments in developing and amountprotecting our technologies, the returns on which are dependent upon the generation of such proceeds, if any, are difficult to predict and there can be no assurance we will receive any proceeds from these enforcement actions. future revenues for realization.
34
Our ability to meet our liquidity needs for the twelve months after the issuance date is dependent upon one or more of (i) our ability to develop, market and sell existing and new products; (ii) our ability to successfully negotiate licensing agreements and/or settlements relating to the use of our technologies by others in excess of our contingent payment obligations to BKI and legal counsel; and/or (iii) our ability to raise additional capital from the sale of equity securities or other financing arrangements. We anticipate that we will continue to invest in patent protection, research and development, and production, selling and marketing of our WiFi networking product line. We expect that revenue generated from product sales, patent enforcement actions, and technology licenses over the twelve months after the issuance date will not be sufficient to cover our operating expenses. In the event we do not generate revenues, or other patent-asset proceeds, sufficient to cover our operational costs and contingent repayment obligation, we will be required to raise additional working capital through the sale of equity securities or other financing arrangements.
We are pursuing a two to three year financing transaction with third parties that may include debt, equity, in the form of common and preferred stock, or a combination thereof. There can be no assurance that we will be able to consummate a financing transaction with any of these third parties or that the terms of any such financing will be on terms and conditions that are acceptable. Until such time that we are able to consummate a longer-term financing transaction, we will continue to use the capacity available under our ATM and our common stock purchase agreement with Aspire to fund our short-term operations. The capital available to us under those financing vehicles is limited based on the remaining amounts available under our Shelf and limitations under Nasdaq rules with regards to the issuance of shares in excess of 19.99% of pre-transaction shares outstanding (see Note 11).
The long-term continuation of our business plan is dependent upon our ability to secure sufficient financing to support our business, and our ability to generate revenues and/or patent-related proceeds sufficient to offset expenses and meet our contingent payment obligation. Failure to generate sufficient revenues, raise additional capital through debt or equity financings, and/or reduce operating costs could have a material adverse effect on our ability to meet our long-term liquidity needs and achieve our intended long-term business objectives.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
Our consolidated financial statements are prepared in accordance with generally accepted accounting principles.principles in the U.S. (“GAAP”). Certain reclassifications have been made to prior period amounts to conform to the current period presentation. The consolidated financial statements include the accounts of ParkerVision, Inc. and our wholly-owned German subsidiary, ParkerVision GmbH, after elimination of all intercompany transactions and accounts. As of December 31, 2023, we are in the process of liquidating ParkerVision GmbH which will have no impact on the consolidated financial statements.
Use of Estimates in the Preparation of Financial Statements
The preparation of financial statements in conformity with generally accepted accounting principlesGAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. The more significant estimates made by us include projected future cash flows and risk-adjusted discount rates for estimating the fair value of our secured contingent payment obligation,obligations, the volatility and estimated lives of share-based awards used in the estimate of the fair market value of share-based compensation, the assessment of recoverability of long-lived assets, the amortization periods for intangible and long-lived assets, and the valuation allowance for deferred taxes. Actual results could differ from the estimates made. We periodically evaluate estimates used in the preparation of the financial statements for continued reasonableness. Appropriate adjustments, if any, to the estimates used are made prospectively based upon such periodic evaluation.
35
Cash Cash Equivalents, and Restricted Cash Equivalents
We consider cash and cash equivalents to include cash on hand, interest-bearing deposits, overnight repurchase agreements and investments with original maturities of three months or less when purchased. Restricted cash equivalents represent money market investments that are restricted for specific use in payment of legal fees and expenses related to certain of our patent infringement actions. The restricted money market investments have weighted average maturities of three months or less when purchased and are recorded at fair value. We have determined that the fair value of our restricted money market investments fall within Level 1 in the fair value hierarchy (see Note 16).
Available-for-Sale Securities
Available-for-sale securities are intended to be held for indefinite periods of time and are not intended to be held to maturity. These securities are recorded at fair value and any unrealized holding gains and losses, net of the related tax effect, are excluded from earnings and are reported as a separate component of accumulated other comprehensive loss until realized. The tax effect of our unrealized holding gains and losses is zero for each of the years ended December 31, 2017 and 2016 due to the existence of a full valuation allowance. Our available-for-sale securities at December 31, 2017 and 2016 consisted of mutual funds that invest primarily in short-term municipal securities with an average effective maturity of one year or less. All dividends and realized gains are recognized as other income as earned and immediately reinvested. The Company has determined that the fair value of its available-for-sale securities fall within Level 1 in the fair value hierarchy (See Note 16).
Inventory
Inventory is stated at the lower of actual cost, as determined under the first-in, first-out method, or estimated net realizable value. We review our inventory for estimated obsolescence or unmarketable inventory and write down inventory for the difference between cost and estimated market value based upon assumptions about future demand. Future demand is affected by market conditions, technological obsolescence, new products and strategic plans, each of which is subject to change. For the year ended December 31, 2017, we recognized a write down of excess inventory of our PV5870 ICs of approximately $0.1 million.
Property and Equipment
Property and equipment are stated at cost, less accumulated depreciation. Depreciation is determined using the straight-line method over the following estimated useful lives:
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The cost and accumulated depreciation
36
Intangible Assets
We capitalize outside legal costs and agency filing fees incurred in connection with securing the rights to our intellectual property. Patents, copyrights, and other intangible assets are amortized using the straight-line method over their estimated period of benefit. We estimate the economic lives of our patents and copyrights to be fifteen to twenty years. We estimate the economic lives of other intangible assets, including licenses, based on estimated technological obsolescence, to be two to five years, which is generally shorter than the contractual lives. Management evaluates the recoverability of intangible assets periodically and takes into accountconsiders events or circumstances that may warrant revised estimates of useful lives or that may indicate impairment exists. As part of our ongoing patent maintenance program, we will, from time to time, abandon a particular patent if we determine fees to maintain the patent exceed its expected recoverability. The cost and accumulated amortization of abandoned intangible assets are removed from their respective accounts, and any resulting net loss is recognized in selling, general and administrative expenses in the accompanying consolidated statements of comprehensive income (loss).
Secured
Contingent Payment ObligationObligations
We have accounted for our secured and unsecured contingent repayment obligationpayment obligations as long-term debt in accordance with Accounting Standards Codification (“ASC”) 470-10-25,470-10-25, “Sales of Future Revenues or Various other Measures of Income.” Our repaymentpayment obligations are contingent upon the receipt of proceeds from patent enforcement and/or patent monetization actions. We have elected to measure our secured contingent payment obligationobligations at itstheir estimated fair valuevalues in accordance with ASC 825, “Financial Instruments” based on the variable and contingent nature of the repayment provisions. We have determined that the fair value of our secured and unsecured contingent payment obligationobligations falls within Level 3 in the fair value hierarchy, which involves significant estimates, and assumptions including projected future patent-related proceeds and the risk-adjusted rate for discounting future cash flows (see Note 16)11). Actual results could differ from the estimates made. Changes in fair value, including the component related to imputed interest, are included in the accompanying consolidated statements of comprehensive lossincome (loss) under the heading “Change in fair value of contingent payment obligation”.obligations.”
Leases
Our facilities are leased underWe account for finance and operating leases. For those leases that contain rent escalations or rent concessions, we recordin accordance with ASC 842, “Leases” which requires the total rent payable during therecognition of lease term on a straight-line basis over the term of the lease with the difference between the rents paid and the straight-line rent recorded as a deferred rent liability in the accompanying consolidated balance sheets.
In February 2016, the FASB issued ASU 2016-02 “Leases,” to increase transparency and comparability among organizations by recognizing leaseright-of-use assets and lease liabilities on theour consolidated balance sheet and disclosing key information about leasing arrangements. Under the new guidance, a lessee will be required to recognize assets and liabilitiessheets for capitalfinance and operating leases with initial lease terms of more than 12 months. ASU 2016-02 is effective for interim No new finance or operating leases commenced during the years ended December 31, 2023 or 2022. The impacts of leasing arrangements during the years ended December 31, 2023 and annual periods beginning after December 15, 2018. Early adoption is permitted. Upon adoption of ASU 2016-02, beginning period balances for the earliest period presented must be adjusted to reflect the re-measurement of lease assets and liabilities. We anticipate adoption of ASU 2016-02 as of January 1, 2019. We have identified all existing operating and financing leases and are in the process of determining the present value of existing lease assets and liabilities under the new guidance. We are also currently formalizing processes and controls to identify, classify and measure new leases in accordance with ASU 2016-02. The impact of ASU 2016-02 on our consolidated financial statements is currently being evaluated.2022 were not considered material.
Revenue Recognition
We derive revenue from licensing of our intellectual property, settlements from patent infringement disputes, sales of products, and engineering services. The timing of revenue recognition and the amount of revenue recognized depends upon a variety of factors, including the specific terms of each arrangement and the nature of our deliverables and obligations. In general, we recognize revenue when there is persuasive evidence of an arrangement, title has transferred, the amounts are fixed and determinable and the collectability is reasonably assured.
37
Revenue from the sale of products is recognized at the time of shipment to the customer or when the other criteriaaccount for revenue recognition are met, if later. Unearned revenue at December 31, 2017 and 2016 consists of product inventory held by a distributor. Revenue from the sale of our products includes shipping and handling charged to the customer. Product revenue is recorded net of sales tax collected from customers, discounts, and actual and estimated future returns.
The consideration received from patent license and settlement agreements is allocated to the various elements of the arrangement to the extent the revenue recognition differs between the elements of the arrangement. Elements related to past and future royalties as well as elements related to settlement will be recorded as revenue in our consolidated statements of comprehensive loss when earned. We recognize revenues upon execution of a patent license and settlement agreement by both parties provided that the amounts are fixed and determinable, there are no significant undelivered obligations and collectability is reasonably assured. We do not recognize any revenue prior to the execution of an agreement as there is no reliable basis on which we can estimate the amounts related to the elements of the arrangement, or assess collectability. In addition, we do not recognize as revenue any consideration in the agreement that is contingent upon the occurrence of future events until such time that those future events occur.
In May 2014, the FASB issued ASU 2014-09,“Revenueunder ASC 606, “Revenue from Contracts with Customers.” ASU 2014-09Customers” which implements a common revenue standard that clarifies the principles for recognizing revenue. This new revenue recognition model provides a five-stepfive-step analysis in determining when and how revenue is recognized. ASU 2015-14, “Revenue from ContractsThese steps include (1) identifying the contract with Customers (Topic 606)”, issued in August 2015, defers adoption of ASU 2014-09the customer, (2) identifying the performance obligations, (3) determining the transaction price, (4) allocating the transaction price to annual reporting periods beginning after December 15, 2017. We do not currently expect the adoption of ASU 2014-09 to have a material effect on our consolidated financial statementsperformance obligations, and (5) recognizing revenue as the entity satisfies the performance obligation(s).
ShippingOur revenue is derived from patent licensing and Handling Costs
Shippingsettlement agreements. We have an active monitoring and handling costsenforcement program with respect to our intellectual property rights that includes seeking appropriate compensation from third parties that utilize or have utilized our intellectual property without a license. As a result, we may receive payments as part of a settlement or in the form of court-awarded damages for a patent infringement dispute. The timing and amount of revenue recognized from each licensee depend upon a variety of factors, including the specific terms of each agreement and the nature of the deliverables and obligations. Such agreements are often complex and may include multiple performance obligations. These agreements can include performance obligations related to productthe settlement of past patent infringement liabilities, royalties on future covered products sold by licensees, access to a portfolio of technology as it exists at a point in time, and/or promises to provide technology updates to the portfolio during the term of the license.
Refer to Note 3 for additional disclosures related to our revenue.
Cost of Sales
Cost of sales were approximately $5,000, or 5%includes amortization of productintangible assets directly linked with revenue generating licensing activities. Amortization expense for the year ended December 31, 2017. These costsintangible assets that are not directly related to revenue generating licensing activities are included in selling, general, and administrative expenses in the accompanyingour consolidated statements of comprehensive loss.income (loss). As a result of the confidential patent license and settlement agreement reached in February 2023, all of our patents are now directly linked with revenue generating licensing activities and, therefore, amortization expense for all intangible assets is now recorded to cost of sales.
Advertising Expense
Advertising costs are expensed as incurred. Advertising expenses of approximately $0.4 million and $0 for the years ended December 31, 2017 and 2016, respectively, are included in selling, general, and administrative expenses in the accompanying consolidated statements of comprehensive loss.
Research and Development Expenses
Research and development costs are expensed as incurred and include salaries and benefits, costs paid to third party contractors, prototype expenses, an allocated portion of facilities costs, maintenance costs for software development tools, and depreciation.
38
Accounting for Share-Based Compensation
We have various share-based compensation programs which provide for equity awards including stock options, restricted stock units (“RSUs”) and restricted stock awards (“RSAs”). We calculate the fair value of employee share-based equity awards on the date of grant and recognize the calculated fair value as compensation expense over the requisite service periods of the related awards. We estimate the fair value of stock option awards using the Black-Scholes option valuation model. This valuation model requires the use of highly subjective assumptions and estimates including how long employees will retain their stock options before exercising them and the volatility of our common stock price over the expected life of the equity award. Such estimates, and the basis for our conclusions regarding such estimates, are outlined in detail in Note 10.15. Estimates of fair value are not intended to predict actual future events or the value ultimately realized by persons who receive equity awards. We account for forfeitures of share-based awards as they occur.
In May 2017, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2017-09, “Compensation - Stock Compensation (Topic 718): Scope of Modification Accounting.” This update provides guidance on the types of changes to the terms or conditions of share-based payment awards to which an entity would be required to apply modification accounting under ASC 718. The new standard is effective for annual periods beginning after December 15, 2017 and interim periods within those years. Early adoption is permitted. The adoption of this guidance is not expected to have a material effect on our consolidated financial statements.
Income Taxes
The provision for income taxes is based on lossincome (loss) before taxes as reported in the accompanying consolidated statements of comprehensive loss.income (loss). Deferred tax assets and liabilities are recognized for the expected future tax consequences of events that have been included in the financial statements or tax returns. Deferred tax assets and liabilities are determined based on differences between the financial statement carrying amounts and the tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Valuation allowances are established to reduce deferred tax assets when, based on available objective evidence, it is more likely than not that the benefit of such assets will not be realized. Our deferred tax assets exclude unrecognized tax benefits which do not meet a more-likely-than-notmore-likely-than-not threshold for financial statement recognition for tax positions taken or expected to be taken in a tax return.
On
2.LIQUIDITY AND GOING CONCERN
The accompanying consolidated financial statements as of and for the year ended December 22, 2017,31, 2023 were prepared assuming we will continue as a going concern, which contemplates that we will continue in operation and will be able to realize our assets and settle our liabilities and commitments in the Tax Cutsnormal course of business for a period of at least one year from the issuance date of these consolidated financial statements. These consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and Jobs Actclassification of 2017 (the “Tax Act”) was signed into law makingassets or the amounts and classification of liabilities that could result should we be unable to continue as a going concern.
With the exception of the year ended December 31, 2023,we have incurred significant changeslosses from operations and negative cash flows in every year since inception, largely as a result of our significant investments in developing advanced technologies and protecting our intellectual property. We have utilized the proceeds from sales of debt and equity securities and contingent funding arrangements with third parties to fund our operations, including the cost of litigation to enforce our intellectual property rights. At December 31, 2023, we had cash and cash equivalents of approximately $2.6 million, working capital of $0.4 million, and an accumulated deficit of approximately $433.7 million.
For the year ended December 31, 2023, we recognized net income of approximately $9.5 million and cash flows from operations of approximately $10.8 million. The net income and related cash flows is a result of revenue from a patent license and settlement agreement, net of contingent legal fees. For the year ended December 31, 2023, we made payments of $13.9 million on our secured contingent payment obligation, $0.1 million on a related party note, and $0.2 million upon the maturity of convertible notes. We received aggregate proceeds from new borrowings under our secured contingent payment obligation of $5.0 million and aggregate net proceeds from convertible debt and equity financings of approximately $0.9 million. These proceeds will be used to support our operations.
Despite the net income and cash flows generated during the year ended December 31, 2023, a significant amount of future proceeds that we may receive from our patent enforcement and licensing programs will first be utilized to repay borrowings, legal fees, and litigation expenses under our contingent funding arrangements. In addition, we have approximately $1.5 million in convertible debt that, if not converted, will mature between June 2024 and January 2025. These circumstances raise substantial doubt about our ability to continue to operate as a going concern for a period of one year following the issue date of these consolidated financial statements.
Our business plan is currently focused solely on our patent enforcement and technology licensing objectives. The timing and amount of proceeds from our patent enforcement actions are difficult to predict and there can be no assurance we will receive any proceeds from these enforcement actions. Refer to Note 13 for a complete discussion of our patent enforcement proceedings.
Significant portions of our litigation costs to date have been funded by contingent payment arrangements with legal counsel. Fee discounts offered by legal counsel in exchange for contingent payments upon successful outcome in our litigation are not recognized in expense until such time that the related proceeds on which the contingent fees are payable are considered probable. Contingent fees vary based on each firm’s specific fee agreement. We currently have contingent fee arrangements in place for all of our active cases. In addition to our contingent fee agreements with legal counsel, we have secured and unsecured contingent payment obligations that have priority payments due from patent-related proceeds.
Our current capital resources are not sufficient to meet our liquidity needs for the next twelve months and we may be required to seek additional capital. Our ability to meet our liquidity needs for the next twelve months is dependent upon (i) our ability to successfully negotiate licensing agreements and/or settlements relating to the Internal Revenue Code. Changes include, but are not limiteduse of our technologies by others in excess of our contingent payment obligations, (ii) our ability to a corporate tax rate decreasecontrol operating costs, (iii) our ability to 21% effectivesuccessfully negotiate extensions to the maturity date for tax years beginning after December 31, 2017.certain convertible notes, and/or (iv) our ability to obtain additional debt or equity financing. We expect that proceeds received by us from patent enforcement actions and technology licenses over the next twelve months may not alone be sufficient to cover our working capital requirements.
Loss per Common ShareWe expect to continue to invest in the support of our patent licensing and enforcement program. The long-term continuation of our business plan is dependent upon the generation of sufficient cash flows from our technologies and or products to offset expenses and debt obligations. In the event that we do not generate sufficient cash flows, we will be required to obtain additional funding through public or private debt or equity financing or contingent fee arrangements and/or reduce operating costs. Failure to generate sufficient cash flows, raise additional capital through debt or equity financings or contingent fee arrangements, and/or reduce operating costs could have a material adverse effect on our ability to meet our short and long-term liquidity needs and achieve our intended long-term business objectives.
3.REVENUE
During the years ended December 31, 2023 and 2022, we recognized $25.00 million and $0.93 million of revenue, respectively, derived from contracts with licensees. The contracts provide access to specified patented technologies as they exist at a point in time, and we have no obligation to provide any future updates. The consideration received by us was negotiated as part of a settlement of patent litigation where no prior license agreement existed. The performance obligations were satisfied upon our dismissal of patent enforcement actions with each licensee which was contingent upon our receipt of the negotiated and agreed-upon lump-sum payments from the licensees. The contracts included no variable consideration. All consideration received was recorded to licensing revenue as there were no other material components of the contracts. No contract assets or liabilities exist as of December 31, 2023.
4.EARNINGS PER SHARE
Basic lossearnings per common share is determined based on the weighted-average number of common shares outstanding during each year.period. Diluted loss per common share is the same as basic loss per common share for the year ended December 31, 2022, as all potential common sharesshare equivalents are excluded from the calculation, as their effect is anti-dilutive. The dilutive effect of outstanding options and warrants is calculated using the treasury stock method. The dilutive effect of shares underlying convertible notes was calculated using the if-converted method. The following table shows the computation of basic and diluted earnings (loss) per share for the years ended December 31, 2023 and 2022 (net income (loss) and shares in thousands):
Year Ended December 31, | ||||||||
2023 | 2022 | |||||||
Numerator: | ||||||||
Net income (loss) | $ | 9,515 | $ | (9,813 | ) | |||
Effect of dilutive securities | 402 | - | ||||||
Net income (loss) adjusted for dilutive effect | 9,917 | (9,813 | ) | |||||
Denominator: | ||||||||
Weighted-average basic shares outstanding | 85,732 | 78,395 | ||||||
Effect of dilutive securities | 34,156 | - | ||||||
Weighted-average diluted shares | 119,888 | 78,395 | ||||||
Basic earnings (loss) per share | $ | 0.11 | $ | (0.13 | ) | |||
Diluted earnings (loss) per share | $ | 0.08 | $ | (0.13 | ) | |||
Options and warrants to purchase 1.4 million and 1.1 million shares
Diluted earnings per common stock were outstanding at share for the years ended December 31, 2017 2023 and 2016, respectively. In addition, unvested RSUs representing 0.5 million and 0.3 million shares of common stock were outstanding at December 31, 2017 and 2016, respectively. These2022 excludes options, warrants, and RSUsshares underlying convertible notes that are anti-dilutive. The anti-dilutive common share equivalents at December 31, 2023 and 2022 were excluded from the computation of diluted loss per share as their effect would have been anti-dilutive. follows (in thousands):
2023 | 2022 | |||||||
Options outstanding | 26,034 | 24,380 | ||||||
Warrants outstanding | 10,346 | 10,346 | ||||||
Shares underlying convertible notes | - | 32,734 | ||||||
| 36,380 | 67,460 | |||||||
5.PREPAID EXPENSES
39
4. INVENTORIES
InventoriesPrepaid expenses consisted of the following at December 31, 2017 2023 and 20162022 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
| 2017 |
| 2016 | ||
Raw materials | $ | 573 |
| $ | - |
Work-in-process |
| - |
|
| 126 |
Finished goods |
| 452 |
|
| 44 |
| $ | 1,025 |
| $ | 170 |
|
|
|
|
|
|
5. PREPAID EXPENSES AND OTHER
2023 | 2022 | |||||||
Prepaid services | $ | 31 | $ | 202 | ||||
Prepaid insurance | 12 | 25 | ||||||
Prepaid licenses, software tools and support | 16 | 15 | ||||||
Other prepaid expenses | 2 | 2 | ||||||
| $ | 61 | $ | 244 | |||||
Prepaid expenses and other current assets consisted of the followingservices at December 31, 2017 and 2016 (in thousands):2022 include approximately $0.2 million of consulting services paid in shares of stock or warrants to purchase shares of stock in the future. There were no consulting services paid in shares of stock or warrants included in prepaid services at December 31, 2023.
|
|
|
|
|
|
|
|
|
|
|
|
| 2017 |
| 2016 | ||
Prepaid services | $ | 328 |
| $ | 459 |
Prepaid licenses, software tools and support |
| 404 |
|
| 41 |
Prepaid inventory and production tooling |
| 121 |
|
| - |
Prepaid insurance |
| 54 |
|
| 108 |
Other prepaid expenses and current assets |
| 104 |
|
| 77 |
| $ | 1,011 |
| $ | 685 |
|
|
|
|
|
|
6.PROPERTY AND EQUIPMENT, NET
Property and equipment, at cost, consisted of the following at December 31, 2017 and 2016 (in thousands):
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|
|
|
|
|
|
|
|
|
| 2017 |
| 2016 | ||
Equipment and software, including equipment purchased under capital leases of $297 and $292 at December 31, 2017 and 2016, respectively | $ | 6,556 |
| $ | 7,777 |
Tooling |
| - |
|
| 94 |
Leasehold improvements |
| 786 |
|
| 926 |
Furniture and fixtures |
| 185 |
|
| 502 |
|
| 7,527 |
|
| 9,299 |
Less accumulated depreciation, including accumulated depreciation for equipment purchased under capital leases of $206 and $156 at December 31, 2017 and 2016, respectively |
| (7,151) |
|
| (9,030) |
| $ | 376 |
| $ | 269 |
|
|
|
|
|
|
Depreciation expense related to property and equipment was approximately $0.15 million and $0.17 million in 2017 and 2016, respectively. Depreciation expense includes depreciation related to capital leases of approximately $0.05 million and $0.06 for the periods ended December 31, 2017 and 2016, respectively.
Our capital leases have original terms of one to three years. The principal payments for these capital leases are reflected as cash outflows from financing activities in the accompanying consolidated statements of cash flows. Future minimum lease payments under our capital leases that have initial terms in excess of one year are included in “Contractual Obligations” in Note 13.
40
7. INTANGIBLE ASSETS
Intangible assets consisted of the following at December 31, 2017 2023 and 20162022 (in thousands):
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|
|
|
|
| 2017 | |||||||
| Gross |
| Accumulated |
| Net Value | |||
Patents and copyrights | $ | 19,324 |
| $ | 14,248 |
| $ | 5,076 |
Licenses |
| - |
|
| - |
|
| - |
| $ | 19,324 |
| $ | 14,248 |
| $ | 5,076 |
|
|
|
|
|
|
|
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|
|
|
|
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|
|
|
|
|
|
|
|
| 2016 | |||||||
| Gross |
| Accumulated |
| Net Value | |||
Patents and copyrights | $ | 19,499 |
| $ | 13,231 |
| $ | 6,268 |
Licenses |
| 574 |
|
| 574 |
|
| - |
| $ | 20,073 |
| $ | 13,805 |
| $ | 6,268 |
|
|
|
|
|
|
|
|
|
2023 | 2022 | |||||||
Patents and copyrights | $ | 10,431 | $ | 14,319 | ||||
Less accumulated amortization | (9,376 | ) | (12,960 | ) | ||||
| $ | 1,055 | $ | 1,359 | |||||
Amortization expense for each of the years ended December 31, 2017 2023 and 20162022 was approximately $1.2 million.$0.25 million and $0.30 million, respectively. For the years ended December 31, 2023 and 2022, we recorded losses on the disposal of intangible assets of approximately $0.06 million and $0.12 million, respectively.
Future estimated amortization expense for intangible assets that have remaining unamortized amounts as of December 31, 20172023 is as follows (in thousands):
2024 | $ | 228 | ||
2025 | 193 | |||
2026 | 132 | |||
2027 | 115 | |||
2028 | 99 | |||
2029 and thereafter | 288 | |||
Total | $ | 1,055 |
|
|
|
|
|
|
2018 | $ | 1,062 |
2019 |
| 771 |
2020 |
| 546 |
2021 |
| 468 |
2022 |
| 417 |
2023 and thereafter |
| 1,812 |
Total | $ | 5,076 |
|
|
|
8. LONG-TERM DEBT7.ACCRUED LIABILITIES
Other accrued expenses consisted of the following at December 31, 2023 and 2022 (in thousands):
2023 | 2022 | |||||||
Advances | $ | 375 | $ | 425 | ||||
Accrued interest | 66 | 56 | ||||||
Other accrued expenses | 6 | 9 | ||||||
| $ | 447 | $ | 490 | |||||
Advances include amounts received from litigation counsel as advanced reimbursement of out-of-pocket expenses expected to be incurred by us.
8.NOTES PAYABLE
Note Payable to a Related Party
TheWe have an unsecured promissory note payable of $0.5 million to a related party at December 31, 2017 and 2016, consisted of the following (in thousands):
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|
|
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|
|
|
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|
|
|
|
|
|
| ||||
Description |
| Interest Rate |
| Interest Payable |
| Maturity Date |
| 2017 |
| 2016 | ||
Note payable to a related party |
| 8% |
| Monthly |
| March 31, 2020 |
| $ | 825 |
| $ | 825 |
Less current maturities |
|
|
|
|
|
|
|
| 294 |
|
| 825 |
Long-term note payable |
|
|
|
|
|
|
| $ | 531 |
| $ | - |
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|
|
|
|
|
|
|
|
|
|
|
|
41
In February 2016, we entered into an agreement withSterne, Kessler, Goldstein, & Fox, PLLC (“SKGF”), a related party (see Note 14) to convert $0.8 million in16), for outstanding unpaid fees into an unsecured promissory note.for legal services. The balancenote, as amended, accrues interest at 4% per annum and provides for monthly payments of principal and interest of $12,500 with a final balloon payment of approximately $0.02 million due at the maturity date of April 30, 2027. We are currently in compliance with all the terms of the note, was scheduled to mature on as amended. For the years ended December 31, 2017. In January 2018,2023 and 2022, we amended the note, retroactiverecognized interest expense of approximately $0.02 million and $0.03 million, respectively related to December 31, 2017 to allow for interest only payments through March 2018 and principle and interest payments through March 31, 2020.
Failure to comply with the payment terms of this note constitutes an event of default which, if uncured, will result in the entire unpaid principal balance of the note and any unpaid, accrued interest to become immediately due and payable. As of December 31, 2017, we are in compliance with the payment terms of the note.
At December 31, 2017,2023, the aggregate maturities of our notenotes payable to a related party are as follows (in thousands):
|
|
|
|
|
|
2018 | $ | 294 |
2019 |
| 420 |
2020 |
| 111 |
Total | $ | 825 |
|
|
|
2024 | $ | 134 | ||
2025 | 139 | |||
2026 | 144 | |||
2027 | 57 | |||
Total | $ | 474 |
The estimated fair value of our notenotes payable at December 31, 20172023 is approximately $0.7$0.39 million based on a risk-adjusted discount rate.
9.CONVERTIBLE NOTES
Our convertible notes represent 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 and 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 consolidated financial statements.
Convertible notes payable at December 31, 2023 and 2022, consist of the following (in thousands):
Fixed | |||||||||||||||||
Conversion | Interest | December 31, | |||||||||||||||
Description | Rate | Rate | Maturity Date | 2023 | 2022 | ||||||||||||
Convertible notes dated September 10, 2018 | $ | 0.40 | 8.0 | % | September 7, 2023 | $ | - | $ | 200 | ||||||||
Convertible notes dated September 18, 2018 | $ | 0.25 | 1 | 8.0 | % | March 18, 2026 1 | 425 | 425 | |||||||||
Convertible notes dated February/March 2019 | $ | 0.25 | 8.0 | % | February 28, 2026 to March 13, 2026 2 | 750 | 750 | ||||||||||
Convertible notes dated June/July 2019 | $ | 0.10 | 8.0 | % | June 7, 2024 to July 15, 2024 | 295 | 295 | ||||||||||
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 3 | 450 | 450 | ||||||||||
Convertible notes dated May-August 2022 | $ | 0.13 | 8.0 | % | May 10, 2027 to August 3, 2027 | 1,468 | 1,668 | ||||||||||
Convertible note dated January 11, 2023 | $ | 0.16 | 9.0 | % | January 11, 2028 3 | 500 | - | ||||||||||
Convertible notes dated January 13, 2023 | $ | 0.16 | 9.0 | % | January 13, 2028 | 200 | - | ||||||||||
Convertible note dated September 15, 2023 | $ | 0.25 | 8.0 | % | March 15, 2026 | 100 | - | ||||||||||
Total principal balance | 4,938 | 4,538 | |||||||||||||||
Less current portion | 1,045 | 625 | |||||||||||||||
| $ | 3,893 | $ | 3,913 | ||||||||||||||
1These notes were amended on September 15, 2023, reducing the conversion rate from $0.57 per share to $0.25 per share and extending the maturity date from September 18, 2023 to March 18, 2026. The amendments are accounted for on a prospective basis in accordance with ASC 470-60.
2These notes were amended on September 15, 2023, extending the maturity date from February 28, 2024 through March 13, 2024 to February 28, 2026 through March 13, 2026. The amendments are accounted for on a prospective basis in accordance with ASC 470-60.
3 The maturity date may be extended by one-year increments for up to an additional ten years at the holder’s option at a reduced interest rate of 2%.
At December 31, 2023, we estimate our convertible notes have an aggregate fair value of approximately $3.7 million and would be categorized within Level 2 of the fair value hierarchy.
10.CONTINGENT PAYMENT OBLIGATIONS
Secured Contingent Payment Obligation
The following table provides a reconciliation of our secured contingent payment obligation measured at estimated fair market value for the yearyears ended December 31, 2017 2023 and 2016,2022, respectively (in thousands). :
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|
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|
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|
|
|
|
|
|
| |||
|
|
| 2017 |
|
| 2016 |
Secured contingent payment obligation, beginning of year |
| $ | 14,185 |
| $ | - |
Proceeds from contingent payment obligation 1 |
|
| 1,000 |
|
| 12,665 |
Repayment |
|
| - |
|
| (3,340) |
Change in fair value |
|
| 711 |
|
| 4,860 |
Secured contingent payment obligation, end of year |
| $ | 15,896 |
| $ | 14,185 |
|
|
|
|
|
|
|
|
|
2023 | 2022 | |||||||
Secured contingent payment obligation, beginning of year | $ | 40,708 | $ | 37,372 | ||||
Proceeds from contingent payment obligation | 5,000 | - | ||||||
Repayment | (13,925 | ) | - | |||||
Change in fair value | (2,381 | ) | 3,336 | |||||
Secured contingent payment obligation, end of year | $ | 29,402 | $ | 40,708 | ||||
Our secured contingent payment obligation represents the estimated fair value of our repayment obligation to Brickell Key Investments, LP (“BKI”Brickell”) under a February 2016 funding agreement, as amended from time to time. On August 14, 2023, the contingent funding agreement with Brickell was replaced with a secured, non-recourse note (the "Note") and a prepaid forward purchase agreement (the "PPFPA"). The Note has a face value of $45.5 million ("Face Value"), accrues simple interest at a fixed rate, and matures on August 14, 2028. Payments under the Note will be made solely from proceeds from our patent assets, net of contingent fees payable to attorneys ("Distributions"). We are obligated to pay one hundred percent (100%) of the first $5.8 million in May 2016Distributions to Brickell, and December 2017. Underthereafter will pay a percentage of Distributions, which varies depending upon the agreement,origin of the Distributions, until the Face Value of the Note, and accrued interest thereon, has been repaid in full. If the amounts payable to Brickell from Distributions are insufficient to repay the face value and interest accrued on the Note by the maturity date, our remaining repayment obligations under the Note will be reduced to zero with future payment obligations, if any, being determined under the PPFPA. The Note is secured by our patent assets and related proceeds and contains standard and customary representations, warranties and covenants. The Note contains events of default including, but not limited to, (a) failure to pay principal or interest on the Note when due; (b) breach of representations or covenants, (c) impairment in the perfection or priority of Brickell's security interests in the collateral, and (d) bankruptcy or dissolution of the Company. In the event of a default, the outstanding principal and accrued interest on the Note will become immediately due and payable. The PPFPA extends beyond the maturity date of the Note and provides that Brickell is entitled to a specified percentage of monetary recoveries resulting from our patent-related actions to the extent not already paid to Brickell under the Note, or otherwise prior to the inception of the Note. The PPFPA also contains standard and customary representations, warranties and covenants. The Note and PPFPA are collectively referred to as our secured contingent payment obligation.
To date, we have received aggregate proceeds of $14$23 million in exchange for BKI’sBrickell’s right to reimbursement and compensation from gross proceeds resulting from patent enforcement and other patent monetization actions.actions and have repaid an aggregate of $17.3 million from patent license and settlement proceeds. The underlying carrying value of the Note, which includes the Face Value plus accrued interest, was approximately $51.0 million as of December 31, 2023, which compares to the minimum return due to Brickell under the prior agreement of $56.9 million as of December 31, 2022. The range of potential proceeds payable to Brickell is discussed more fully in Note 11.
42
BKI is entitled to priority payment of 100% of proceeds received from all patent-related actions until such time that BKI has been repaid in full. After repayment of the funded amount, BKI is entitled to a portion of remaining proceeds up to a specified minimum return which is determined as a percentage of the funded amount and varies based on the timing of repayment. In addition, BKI is entitled to a pro rata portion of proceeds from specified legal actions to the extent aggregate proceeds from those actions exceed the specified minimum return.
BKIBrickell holds a senior security interest in the majority of our assets until such time as the specified minimum returnNote, including accrued interest thereon, is paid in which case, the security interest will be released except with respect to the patents and proceeds related to specific legal actions.full. The security interest is enforceable by BKIBrickell in the event that we are in default under the agreement which would occur if (i) we fail, after notice, to pay proceeds to BKI,Brickell, (ii) we become insolvent or insolvency proceedings are commenced (and not subsequently discharged) with respect to us, (iii) our creditors commence actions against us (which are not subsequently discharged) that affect our material assets, (iv) we, without BKI’sBrickell’s consent, incur indebtedness other than immaterial ordinary course indebtedness, or (v) there is an uncured non-compliance of our obligations or misrepresentations under the agreement. As of December 31, 2017,2023, 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 16)11). The secured contingent payment obligation is remeasured to fair value at each reporting period with changes recorded in the consolidated statements of comprehensive lossincome (loss) until the contingency is resolved.
9. Unsecured Contingent Payment Obligations
The following table provides a reconciliation of our unsecured contingent payment obligations, measured at estimated fair market value, for the years ended December 31, 2023 and 2022, respectively (in thousands):
2023 | 2022 | |||||||
Unsecured contingent payment obligations, beginning of year | $ | 5,089 | $ | 5,691 | ||||
Change in fair value | 2,529 | (602 | ) | |||||
Unsecured contingent payment obligations, end of year | $ | 7,618 | $ | 5,089 | ||||
Our unsecured contingent payment obligations represent amounts payable to others from future patent-related proceeds including (i) a termination fee due to a litigation funder (“Termination Fee”) and (ii) contingent payment rights (“CPRs”) issued to accredited investors primarily in connection with equity financings. We have elected to measure these unsecured contingent payment obligations at their 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. The unsecured contingent payment obligations will be remeasured to fair value at each reporting period with changes recorded in the consolidated statements of comprehensive income (loss) until the contingency is resolved (see Note 11).
The Termination Fee is a result of $1.0 million in advances received under a letter agreement with a third-party funder. Based on the terms of the letter agreement, if a final funding arrangement was not executed by March 31, 2020, we would be obligated to pay, from future patent-related proceeds, an aggregate termination payment equal to five times the advances received, or approximately $5.0 million. We did not consummate a funding agreement and accordingly the advances were recorded as an unsecured contingent payment obligation at March 31, 2020, when the Termination Fee obligation was incurred. As of December 31, 2023, the estimated fair value of unsecured contingent payment obligations related to the Termination Fee is $3.5 million.
The CPRs represent the estimated fair value of rights provided to accredited investors who purchased shares of our common stock in 2020 and 2021 and the fair value of a right issued to a third-party in connection with a service agreement during the year ended December 31, 2020. No sales of common stock with contingent payment rights were completed during the years ended December 31, 2023 and 2022. The terms of the CPRs provide that we will pay each investor an allocated portion of our net proceeds from patent-related actions, after taking into account fees and expenses payable to law firms representing us and amounts payable to Brickell. The investors’ allocated portion of net proceeds will be determined by multiplying the net proceeds recovered by us (up to $10 million) by the quotient of such investors’ subscription amount divided by $10 million, up to an amount equal to each investor’s subscription amount, or an aggregate of $5.8 million. As of December 31, 2023, the estimated fair value of our unsecured contingent payment obligations related to the CPRs is $4.1 million.
11.FAIR VALUE MEASUREMENTS
ASC 820, “Fair Value Measurements” establishes a fair value hierarchy that prioritizes the inputs to valuation methods used to measure fair value. The three levels of the fair value hierarchy are as follows:
● | Level 1: Quoted prices for identical assets or liabilities in active markets which we can access |
● | Level 2: Observable inputs other than those described in Level 1 |
● | Level 3: Unobservable inputs |
The following table summarizes financial assets and financial liabilities carried at fair value and measured on a recurring basis as of December 31, 2023 and 2022, segregated by classification within the fair value hierarchy (in thousands):
Fair Value Measurements | ||||||||||||||||
Total | Quoted Prices in Active Markets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | |||||||||||||
December 31, 2023: | ||||||||||||||||
Liabilities: | ||||||||||||||||
Secured contingent payment obligation | $ | 29,402 | $ | - | $ | - | $ | 29,402 | ||||||||
Unsecured contingent payment obligations | 7,618 | - | - | 7,618 | ||||||||||||
December 31, 2022: | ||||||||||||||||
Liabilities: | ||||||||||||||||
Secured contingent payment obligation | 40,708 | - | - | 40,708 | ||||||||||||
Unsecured contingent payment obligations | 5,089 | - | - | 5,089 | ||||||||||||
For the years ended December 31, 2023 and 2022, respectively, we had no transfers of assets or liabilities between the levels of the hierarchy.
The fair values of our secured and unsecured contingent payment obligations were estimated using a probability-weighted income approach based on various cash flow scenarios as to the outcome of patent-related actions both in terms of timing and amount, discounted to present value using a risk-adjusted rate. We used a risk-adjusted discount rate for the secured and unsecured contingent payment obligations of 18.12% and 18.51%, respectively, at December 31, 2023, based on a risk-free rate of 4.12% and 4.51%, respectively, as adjusted by 8% for credit risk and 6% for litigation inherent risk.
The following table provides quantitative information about the significant unobservable inputs used in the measurement of fair value for both the secured and unsecured contingent payment obligations at December 31, 2023, including the lowest and highest undiscounted payout scenarios as well as a weighted average payout scenario based on relative undiscounted fair value of each cash flow scenario.
Secured Contingent Payment Obligation | Unsecured Contingent Payment Obligations | |||||||||||||||||||||||
Unobservable Inputs | Low | Weighted Average | High | Low | Weighted Average | High | ||||||||||||||||||
Estimated undiscounted cash outflows (in millions) | $ | 0.0 | $ | 43.1 | $ | 79.6 | $ | 0.0 | $ | 9.7 | $ | 10.8 | ||||||||||||
Duration (in years) | 0.5 | 2.3 | 3.5 | 0.5 | 1.4 | 3.5 | ||||||||||||||||||
Estimated probabilities | 5 | % | 20 | % | 35 | % | 5 | % | 23 | % | 35 | % | ||||||||||||
We evaluate the estimates and assumptions used in determining the fair value of our contingent payment obligations each reporting period and make any adjustments prospectively based on those evaluations. Changes in any of these Level 3 inputs could result in a significantly higher or lower fair value measurement.
12.INCOME TAXES AND TAX STATUS
Our net lossesincome (loss) before income taxestax for the years ended December 31, 2017 2023 and 20162022 are from domestic operations as well as losses from our wholly-owned German subsidiary. We elected to treat our German subsidiary as a disregarded entity for purposes of income taxes and accordingly, the losses from our German subsidiary hashave been included in our operating results.
We recorded $0.7 million in current foreign income tax expense for the year ended December 31, 2016 as a result of foreign tax withholding on licensing revenues from a Korean entity. No current or deferred tax provision was recorded in 2023 as a result of net operating loss ("NOL") carryforwards not previously recognized as a tax benefit that we expect to be able to utilize in the current year to offset income tax expense related to current period income. No current or deferred tax benefit was recorded for 2017 and 2016in 2022 as a result of current losses and fully deferred tax valuation allowances for all periods.allowances. We have recorded a valuation allowance to state our remaining deferred tax assets at their estimated net realizable value due to the uncertainty related to realization of these assets through future taxable income.
On December 22, 2017, the U.S. government enacted comprehensive tax legislation, the Tax Act. The Tax Act makes broad and complex changes to the U.S. tax code that includes a reduction to the U.S. federal corporate statutory tax rate to 21% effective in 2018. As of December 31, 2017, our accounting for the income tax effects of the Tax Act has been completed. The federal corporate tax rate reduction creates a reduction to our deferred tax assets and liabilities with a corresponding reduction to our valuation allowance.
43
A reconciliation between the provision for income taxes and the expected tax benefit using the federal statutory rate of 34%21% for each of the years ended December 31, 2017 2023 and 20162022, respectively are as follows (in thousands):
2023 | 2022 | |||||||
Tax expense (benefit) at statutory rate | $ | 1,998 | $ | (2,061 | ) | |||
State tax expense (benefit) | 409 | (422 | ) | |||||
(Decrease) increase in valuation allowance | (2,512 | ) | 2,416 | |||||
Other | 105 | 67 | ||||||
| $ | - | $ | - | |||||
|
|
|
|
|
|
|
|
|
|
|
|
| 2017 |
| 2016 | ||
Tax benefit at statutory rate | $ | (6,548) |
| $ | (7,313) |
State tax benefit |
| (674) |
|
| (753) |
Impact of the Tax Act |
| 41,646 |
|
| - |
(Decrease) increase in valuation allowance |
| (34,346) |
|
| 8,145 |
Research and development credit |
| (129) |
|
| (97) |
Other |
| 51 |
|
| 18 |
| $ | - |
| $ | - |
|
|
|
|
|
|
Our deferred tax assets and liabilities relate to the following sources and differences between financial accounting and the tax bases of our assets and liabilities at December 31, 2017 2023 and 20162022 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
| 2017 |
| 2016 | ||
Gross deferred tax assets: |
|
|
|
|
|
Net operating loss carry-forward | $ | 82,168 |
| $ | 115,296 |
Research and development credit |
| 8,051 |
|
| 7,922 |
Stock compensation |
| 1,248 |
|
| 1,885 |
Patents and other |
| 1,427 |
|
| 2,119 |
Contingent payment obligation |
| 1,409 |
|
| 1,823 |
Fixed assets |
| 25 |
|
| 78 |
Accrued liabilities |
| 49 |
|
| 54 |
Deferred rent |
| 20 |
|
| 19 |
Charitable contributions |
| 7 |
|
| 11 |
Deferred revenue |
| 5 |
|
| 7 |
Capital loss carry-forward |
| 3 |
|
| 8 |
Warranty reserve |
| 2 |
|
| - |
Bad debt expense |
| 1 |
|
| 2 |
Inventory |
| - |
|
| 1 |
|
| 94,415 |
|
| 129,225 |
Less valuation allowance |
| (94,415) |
|
| (129,225) |
Net deferred tax asset | $ | - |
| $ | - |
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|
2023 | 2022 | |||||||
Gross deferred tax assets: | ||||||||
Net operating loss carry-forward | $ | 70,159 | $ | 75,470 | ||||
Research and development credit carry-forward | 4,565 | 5,356 | ||||||
Stock compensation | 1,350 | 1,127 | ||||||
Patents and other | 568 | 1,482 | ||||||
Contingent payment obligations | 7,071 | 7,033 | ||||||
Fixed assets | (1 | ) | (2 | ) | ||||
Charitable contributions | 2 | - | ||||||
Lease liabilities | - | 1 | ||||||
| 83,714 | 90,467 | |||||||
Less valuation allowance | (83,714 | ) | (90,467 | ) | ||||
Net deferred tax asset | $ | - | $ | - | ||||
At December 31, 2017,2023, we had cumulative NOL research and development (“R&D”) tax credit carry-forwards and capital loss carry-forwards for income tax purposes of $328.4$279.8 million, $8.1of which $239.1 million is subject to expiration in varying amounts from 2024 to 2037. At December 31, 2023, we also had research and $0.01development tax credit carryforwards of $4.6 million, respectively, which expire in varying amounts from 20182024 through 2036. 2038.
Our ability to benefit from the ourNOL and tax credit carry-forwards could be limited under certain provisions of the Internal Revenue Code if ourthere are ownership changes byof more than 50%, as defined by Section 382 of the Internal Revenue Code of 1986 (“Section 382”). Under Section 382, an ownership change may limit the amount of NOL, capital loss and R&D credit carry-forwards that can be used annually to offset future taxable income and tax, respectively. In general, an ownership change, as defined by Section 382, results from transactions increasing the ownership of certain shareholders or public groups in the stock of a corporation by more than 50 percentage points over a three-yearthree-year period. We conduct a study annually of our ownership changes. Based on the results of our studies, we have determined that we do not have any ownership changes on or prior to December 31, 20172023 which would result in limitations of our NOL, capital loss or R&D credit carry-forwards under Section 382.
44
Uncertain Tax Positions
We file income tax returns in the U.S. federal jurisdiction, and various state jurisdictions.jurisdictions, and Germany. We have identified our Federal and Florida tax returns as our only major jurisdictions, as defined. The periods subject to examination for those returns are the 19982004 through 20172023 tax years. The following table provides a reconciliation of our unrecognized tax benefits due to uncertain tax positions for the years ended December 31, 2017 2023 and 2016,2022, respectively (in thousands).:
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| 2017 |
| 2016 | ||
Unrecognized tax benefits – beginning of year | $ | 1,370 |
| $ | 1,370 |
Gross increases – tax positions in prior period |
| - |
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| - |
Impact of the Tax Act |
| (443) |
|
| - |
Unrecognized tax benefits – end of year | $ | 927 |
| $ | 1,370 |
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|
|
|
2023 | 2022 | |||||||
Unrecognized tax benefits – beginning of year | $ | 638 | $ | 653 | ||||
Reduction as a result of lapse of statute of limitations | - | (15 | ) | |||||
Unrecognized tax benefits – end of year | $ | 638 | $ | 638 | ||||
Future changes in the unrecognized tax benefit will have no impact on the effective tax rate so long as we maintain a full valuation allowance.
Our policy is that we recognize interest and penalties accrued on any unrecognized tax benefits as a component of our income tax expense. We do not have any accrued interest or penalties associated with any unrecognized tax benefits. For the years ended December 31, 2017 2023 and 2016,2022, we did not incur any income tax-related interest income, expense or penalties.
10. SHARE-BASED COMPENSATION
The following table presents share-based compensation expense included in our consolidated statements of comprehensive loss for the years ended December 31, 2017 and 2016, respectively (in thousands):
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| 2017 |
| 2016 | ||
Research and development expense | $ | 564 |
| $ | 630 |
Selling, general, and administrative expense |
| 1,600 |
|
| 1,580 |
Total share-based compensation expense | $ | 2,164 |
| $ | 2,210 |
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We did not capitalize any expense related to share-based payments. As of December 31, 2017, there was $1.2 million of total unrecognized compensation cost related to all non-vested share-based compensation awards. That cost is expected to be recognized over a weighted-average period of approximately one year.
Stock Incentive Plans
2011 Long-Term Incentive Equity Plan
We adopted a long-term incentive equity plan in September 2011 that, as amended in 2014, 2016 and 2017, provided for the grant of stock-based awards to employees, officers, directors and consultants, not to exceed 3.0 million shares of common stock (the “2011 Plan”). The 2011 Plan provides for benefits in the form of incentive stock options, nonqualified stock options, stock appreciation rights, restricted share awards, and other stock based awards. Forfeited and expired options under the 2011 Plan become available for reissuance. The plan provides that no participant may be granted awards in excess of 150,000 shares in any calendar year. At December 31, 2017, approximately 673,896 shares of common stock were available for future grants under the 2011 Plan.
45
2008 Equity Incentive Plan
We adopted an equity incentive plan in August 2008 (the “2008 Plan”). The 2008 Plan provides for the grant of stock-based awards to employees (excluding named executives), directors and consultants, not to exceed 50,000 shares of common stock. The 2008 Plan provides for benefits in the form of incentive stock options, nonqualified stock options, stock appreciation rights, restricted share awards, and other stock based awards. Forfeited and expired options under the 2008 Plan become available for reissuance. The plan provides that no participant may be granted awards in excess of 5,000 shares in any calendar year. At December 31, 2017, 15,142 shares of common stock were available for future grants under the 2008 Plan.
2000 Performance Equity Plan
We adopted a performance equity plan in July 2000 (the “2000 Plan”). The 2000 Plan provided for the grant of options and other stock awards to employees, directors and consultants, not to exceed 500,000 shares of common stock. The 2000 Plan provided for benefits in the form of incentive and nonqualified stock options, stock appreciation rights, restricted share awards, stock bonuses and various stock benefits or cash. Upon shareholder approval of amendments to our 2011 Long-Term Incentive Equity Plan on June 17, 2014, the 2000 Plan was amended such that no further awards may be granted under this plan.
Restricted Stock Awards
RSAs are issued as executive and employee incentive compensation and as payment for services to others. The value of the award is based on the closing price of our common stock on the date of grant. RSAs are generally immediately vested.
Restricted Stock Units
RSUs are issued as incentive compensation to executives, employees, and non-employee directors as well as payment for services to third parties. Each RSU represents a right to one share of our common stock, upon vesting. The RSUs are not entitled to voting rights or dividends, if any, until vested. RSUs generally vest over a one to three year period for employee awards, a one year period for non-employee director awards and the life of the related service contract for third-party awards. The fair value of RSUs is generally based on the closing price of our common stock on the date of grant and is amortized to share-based compensation expense over the estimated life of the award, generally the vesting period. In the case of RSUs issued to third parties, the fair value is recognized based on the closing price of our common stock on each vesting date.
RSAs and RSUs
The following table presents a summary of RSA and RSU activity under the 2000, 2008, and 2011 Plans (collectively, the “Stock Plans”) as of December 31, 2017 (shares in thousands):
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| Non-vested Shares | |||
| Shares |
| Weighted-Average | |
Non-vested at beginning of year | 330 |
| $ | 5.16 |
Granted | 669 |
|
| 1.98 |
Vested | (476) |
|
| 4.18 |
Forfeited | (2) |
|
| 1.98 |
Non-vested at end of year | 521 |
| $ | 1.98 |
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The total fair value of RSAs and RSUs vested under the Stock Plans for the year ended December 31, 2017 is $0.9 million.
46
Stock Options
Stock options are issued as incentive compensation to executives, employees, non-employee directors, and third parties. Stock options are generally granted with exercise prices at or above fair market value of the underlying shares at the date of grant. The fair value of options granted is estimated using the Black-Scholes option pricing model. Generally, fair value is determined as of the grant date. In the case of option grants to third parties, the fair value is estimated at each interim reporting date until vested. Options for employees, including executives and non-employee directors, are generally granted under the Stock Plans.
The following table presents a summary of option activity under the Stock Plans for the year ended December 31, 2017 (shares in thousands):
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| Shares |
| Weighted- |
| Weighted-Average |
| Aggregate | |||
Outstanding at beginning of year | 691 |
| $ | 14.89 |
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|
Granted | 318 |
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| 1.97 |
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Exercised | - |
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| - |
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|
Forfeited | - |
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| - |
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|
|
Expired | (2) |
|
| 6.80 |
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Outstanding at end of year | 1,007 |
|
| 10.82 |
| 3.68 | years |
| $ | - |
Vested and expected to vest at end of year | 671 |
| $ | 15.26 |
| 2.33 | years |
| $ | - |
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The weighted average per share fair value of option shares granted during the years ended December 31, 2017 and 2016 was $1.52 and $1.74, respectively. The total fair value of option shares vested was $0.2 million for each of the years ended December 31, 2017 and 2016.
The fair value of option grants under the Stock Plans for the years ended December 31, 2017 and 2016, respectively, was estimated using the Black-Scholes option-pricing model with the following assumptions:
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| Year ended December 31, | ||
| 2017 |
| 2016 |
Expected option term 1 | 4 to 6 years |
| 7 years |
Expected volatility factor 2 | 98.0% to 100.8% |
| 97.80% |
Risk-free interest rate 3 | 1.7% to 2.2% |
| 2.3% |
Expected annual dividend yield | 0% |
| 0% |
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1 The expected term was generally determined based on historical activity for grants with similar terms and for similar groups of employees and represents the period of time that options are expected to be outstanding. For employee options, groups of employees with similar historical exercise behavior are considered separately for valuation purposes. For consultants, the expected term was determined based on the contractual life of the award.
2 The stock volatility for each grant is measured using the weighted average of historical daily price changes of our common stock over the most recent period equal to the expected option life of the grant.
3 The risk-free interest rate for periods equal to the expected term of the share option is based on the U.S. Treasury yield curve in effect at the measurement date.
We occasionally grant stock options outside the Stock Plans, generally to third parties. At December 31, 2016, we had one option for the purchase of 6,000 shares of common stock outstanding and exercisable at an exercise price of $20.10. This option expired unexercised in October 2017. At December 31, 2017, there were no outstanding options outside the Stock Plans.
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Options by Price Range
The options outstanding at December 31, 2017 under all plans have exercise price ranges, weighted average contractual lives, and weighted average exercise prices are as follows (weighted average lives in years and shares in thousands):
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| Options Outstanding |
| Options Vested | ||||||||||
Range of Exercise Prices |
| Number Outstanding at December 31, 2017 |
| Wtd. Avg. Exercise Price |
| Wtd. Avg. Remaining Contractual Life |
| Number Exercisable at December 31, 2017 |
| Wtd. Avg. Exercise Price |
| Wtd. Avg. Remaining Contractual Life | ||
$1.11 - $1.80 |
| 66 |
| $ | 1.75 |
| 5.06 |
| 30 |
| $ | 1.80 |
| 4.88 |
$1.84 - $5.80 |
| 416 |
|
| 2.05 |
| 6.41 |
| 116 |
|
| 2.17 |
| 6.05 |
$7.50 - $11.80 |
| 227 |
|
| 8.98 |
| 0.77 |
| 227 |
|
| 8.98 |
| 0.77 |
$13.20 - $22.60 |
| 46 |
|
| 13.72 |
| 2.68 |
| 46 |
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| 13.72 |
| 2.68 |
$23.80 - $38.80 |
| 243 |
|
| 28.25 |
| 1.58 |
| 243 |
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| 28.25 |
| 1.58 |
$45.10 - $45.10 |
| 9 |
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| 45.10 |
| 2.96 |
| 9 |
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| 45.10 |
| 2.96 |
|
| 1,007 |
| $ | 10.82 |
| 3.68 |
| 671 |
| $ | 15.26 |
| 2.33 |
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Upon exercise of options under all plans, we issue new shares of our common stock. For shares issued upon exercise of equity awards granted under the Stock Plans, the shares of common stock are registered. For shares issued upon exercise of non-plan awards, the shares are not registered unless they have been subsequently registered by us on a registration statement. We have had no option exercises for the years ended December 31, 2017 and 2016.
11. STOCK AUTHORIZATION AND ISSUANCE
Preferred Stock
We have 15 million shares of preferred stock authorized for issuance at the direction of the board of directors. On November 17, 2005, our board of directors designated 0.1 million shares of authorized preferred stock as the Series E Preferred Stock in conjunction with its adoption of a Shareholder Protection Rights Agreement (Note 12). As of December 31, 2017, we had no outstanding preferred stock.
Common Stock
On July 11, 2017, our shareholders approved an amendment to our articles of incorporation to increase the number of authorized shares of common stock from 20 million to 30 million shares.
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Stock Issuances
The following table presents a summary of completed equity offerings for the years ended December 31, 2017 and 2016 (in thousands, except for per share amounts):
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Date | Transaction |
| # of Common Shares/ Units Sold |
| Average Price per Share/Unit |
|
| Net Proceeds (1) |
| Offering as % of Outstanding Common Stock (2) |
October - December 2017 | Offerings under Common Stock Purchase Agreement |
| 773 |
| $1.29 |
| $ | 958 |
| 3.6% |
August - December 2017 | Offerings under At Market Issuance Sales Agreement |
| 2,119 |
| $1.50 |
| $ | 2,970 |
| 10.2% |
February 24, 2017 | Offering to a member of our Board of Directors |
| 81 |
| $2.11 |
| $ | 170 |
| 0.5% |
January - March 2017 | Offerings under At Market Issuance Sales Agreement |
| 4,072 |
| $2.46 |
| $ | 9,581 |
| 23.0% |
July 7, 2016 | Offering sold to an individual investor (3) |
| 1,091 |
| $2.75 |
| $ | 2,860 |
| 8.5% |
January 25, 2016 | Offering sold to an in individual investor |
| 455 |
| $2.20 |
| $ | 990 |
| 4.0% |
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Common Stock Purchase Agreement
In October 2017, we entered into a common stock purchase agreement (the “Purchase Agreement”) with Aspire Capital Fund, LLC (“Aspire Capital”). Under the Purchase Agreement, Aspire Capital committed to purchase up to an aggregate of $20 million in shares of our common stock over the 30-month term of the Purchase Agreement. In consideration for entering into the Purchase Agreement, we issued to Aspire Capital 287,500 shares of our common stock as a commitment fee. We filed a registration statement to register the sale of up to 4 million shares of our common stock by Aspire Capital that have been or may be issued under the Purchase Agreement. The registration statement was declared effective November 27, 2017 (File No. 333-221250).
Under the Purchase Agreement, on any trading day selected by us, we have the right, in our sole discretion, to present Aspire Capital with a purchase notice, directing Aspire Capital to purchase up to 150,000 shares of our common stock, provided that the aggregate purchase amount for such shares does not exceed $0.5 million and subject to the maximum aggregate amount of $20 million. The per share purchase price for each purchase notice is equal to the lesser of (i) the lowest sale price of our common stock on the purchase date; or (ii) the arithmetic average of the three lowest closing sale prices for our common stock during the ten consecutive trading days ending on the trading day immediately preceding the purchase date.
In addition, on any date on which we submit a purchase notice to Aspire Capital, we also have the right, in our sole discretion, to present Aspire Capital with a volume-weighted average price (“VWAP”) purchase notice directing Aspire Capital to purchase an amount of stock equal to up to 30% of the aggregate shares of our common stock traded on its principal market on the next trading day, or such lesser amount as we may determine. The purchase price per share pursuant to the VWAP purchase notice isgenerally 97% of the volume-weighted average price for our common stock traded on its principal market on the VWAP purchase date, subject to terms and limitations of the agreement.
The number of shares that may be issued to Aspire Capital under the Purchase Agreement is limited to that number of shares representing 19.99% of our pre-transaction shares outstanding (the “Exchange Cap”), unless shareholder approval is obtained or unless the average price for shares sold in excess of the Exchange Cap is equal or greater to $1.48 which represents the closing bid price of our common stock at the date we entered into the Purchase Agreement.
49
At Market Issuance Sales Agreements
We filed a shelf registration statement on Form S-3 with the SEC in November 2016 (Registration No. 333-214598) for the offering of various securities, up to $15 million, over a period of up to three years. On December 30, 2016, we entered into an ATM agreement with FBR Capital Markets & Co. (“FBR”) for the sale of up to $10 million in shares of our common stock under the shelf registration statement (the “First ATM”). From January through March 2017, we sold an aggregate of 4.1 million shares of our common stock at an average price of $2.46 per share under the First ATM.
On August 14, 2017, we entered into a new ATM agreement with FBR for the sale of up to approximately $4.4 million in shares of our common stock registered under the shelf registration statement (the “Second ATM”). From August to December 2017, we completed the sale of approximately 2.1 million shares of our common stock at an average price of $1.50 under the Second ATM. We had approximately $1.2 million remaining available for sale under the Second ATM as of December 31, 2017.
Stock for Services
For the year ended December 31, 2017, we issued an aggregate of 0.3 million shares of unregistered common stock to two consultants in exchange for an aggregate of approximately $0.4 million in prepaid retainers for executive consulting and other advisory services. We have no registration obligation with respect to these shares.
Common Stock Warrants
As of December 31, 2017, we had outstanding warrants for the purchase of up to 0.4 million shares of our common stock. The estimated grant date fair value of these warrants of $0.8 million is included in shareholders’ (deficit) equity in our consolidated balance sheets. The outstanding warrants have an average exercise price of $2.21 per share and a weighted average remaining life of approximately three years. Cash received from warrant exercises for the years ended December 31, 2017 and 2016 was $0 and $0.4 million, respectively.
Our outstanding warrants include a warrant issued to BKI in connection with our secured contingent payable obligation (see Note 8). The BKI warrant is for the purchase up to 350,000 shares of our common stock at an exercise price of $2.00 per share valued at its estimated fair market value of $0.3 million using a discounted Black-Scholes model. The aggregate fair value of the BKI warrant is included in shareholders’ (deficit) equity in the consolidated balance sheets at December 31, 2017 and 2016. The shares underlying the warrants were registered on a registration statement declared effective on August 2, 2016.
Director Stock Purchase
On March 26, 2018 three of our directors purchased an aggregate of 0.2 million shares of our common stock in an unregistered sale of equity securities at a purchase price of $0.83 per share. We received proceeds of approximately $0.2 million.
12. SHAREHOLDER PROTECTION RIGHTS AGREEMENT
On November 20, 2015, we amended our Shareholder Protection Rights Agreement (“Rights Agreement”) dated November 21, 2005. The amendment extends the expiration date of the Rights Agreement from November 21, 2015 to November 20, 2020 and decreases the exercise price of the rights to $14.50 after giving effect to the one-for-ten reverse stock split that became effective March 30, 2016.
50
The Rights Agreement provided for the issuance, on November 29, 2005, as a dividend, rights to acquire fractional shares of Series E Preferred Stock. We did not assign any value to the dividend as the value of these rights is not believed to be objectively determinable. The principal objective of the Rights Agreement is to cause someone interested in acquiring us to negotiate with our board of directors (the “Board”) rather than launch an unsolicited or hostile bid. The Rights Agreement subjects a potential acquirer to substantial voting and economic dilution. Each share of common stock issued by ParkerVision will include an attached right.
The rights initially are not exercisable and trade with the common stock of ParkerVision. In the future, the rights may become exchangeable for shares of Series E Preferred Stock with various provisions that may discourage a takeover bid. Additionally, the rights have what are known as “flip-in” and “flip-over” provisions that could make any acquisition of us more costly to the potential acquirer. The rights may separate from the common stock following the acquisition of 15% or more of the outstanding shares of common stock by an acquiring person. Upon separation, the holder of the rights may exercise their right at an exercise price of $14.50 per right (the “Exercise Price”), subject to adjustment and payable in cash. Upon payment of the Exercise Price, the holder of the right will receive from us that number of shares of common stock having an aggregate market price equal to twice the Exercise Price, as adjusted. The Rights Agreement also has a flip over provision allowing the holder to purchase that number of shares of common/voting equity of a successor entity, if we are not the surviving corporation in a business combination, at an aggregate market price equal to twice the Exercise Price. We have the right to substitute for any of our shares of common stock that we are obligated to issue, shares of Series E Preferred Stock at a ratio of one ten-thousandth of a share of Series E Preferred Stock for each share of common stock. The Series E Preferred Stock, if and when issued, will have quarterly cumulative dividend rights payable when and as declared by the Board, liquidation, dissolution and winding up preferences, voting rights and will rank junior to other securities of ParkerVision unless otherwise determined by the Board.
The rights may be redeemed upon approval of the Board at a redemption price of $0.01.
51
13.COMMITMENTS AND CONTINGENCIES
Lease Commitments
The following table presents a summary of our facilities under non-cancelable lease agreements at December 31, 2017:
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Deferred rent is amortized to rent expense over the respective lease terms. In addition to sales tax payable on base rental amounts, certain leases obligate us to pay pro-rated annual operating expenses for the properties. Rent expense for properties, for the years ended December 31, 2017 and 2016 was $0.6 million and $0.5 million, respectively.
Contractual Obligations
Future minimum lease payments under all non-cancelable operating leases and capital leases that have initial terms in excess of one year as of December 31, 2017 were as follows (in thousands):
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Contractual obligations: | 2018 |
| 2019 |
| 2020 and thereafter |
| Total | ||||
Operating leases | $ | 372 |
| $ | 185 |
| $ | 535 |
| $ | 1,092 |
Capital leases | $ | 2 |
| $ | 2 |
| $ | 1 |
| $ | 5 |
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Legal Proceedings
From time to time, we are subject to legal proceedings and claims which arise in the ordinary course of our business. These proceedings include patent enforcement actions initiated by us against others for the infringement of our technologies, as well as proceedings brought by others against us at the Patent Trial and Appeal Board of the U.S. Patent and Trademark Office (“PTAB”) and in the Federal Patent Court in Germany in an attempt to invalidate certain of our patent claims. These patent-related proceedings are more fully described below.We have several patent enforcement actions in Germany which has a “loser pay” system whereby the non-prevailing party is responsible for statutory attorney fees and costs. We do not believe it is probable that we will have unfavorable outcomes in any
The majority of our German caseslitigation, including our PTAB proceedings, is being paid for through contingency fee arrangements with our litigation counsel as well as third-party litigation financing. In general, litigation counsel is entitled to recoup on a priority basis, from litigation proceeds, any out-of-pocket expenses incurred. Following reimbursement of out-of-pocket expenses, litigation counsel is generally entitled to a percentage of remaining proceeds based on the terms of the specific arrangement between us, counsel and therefore we have not recorded any expenses related to these statutory fees and costs. However, there is at least a reasonable possibility of an unfavorable outcome in any one or more of these matters that could result in expenses in the aggregate that could have a material unfavorable impact on our results of operations as more fully discussed below.third-party litigation funder.
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ParkerVision v. Qualcomm and HTC (Middle District of Florida)Florida-Orlando Division) - Appealed to U.S. Court of Appeals for the Federal Circuit
We haveIn March 2022, the district court ruled on a number of pre-trial motions in our patent infringement complaint pendingcase against Qualcomm. The court granted Qualcomm motions to strike and exclude opinions regarding the alleged infringement and validity issues, essentially precluding infringement and validity opinions by both of our experts at trial. The court also issued an order granting Qualcomm’s motion for summary judgment ruling that Qualcomm did not infringe the remaining three patents in the case. In April 2022, we filed a notice of appeal to the United States Court of Appeals for the Federal Circuit. A hearing was held on our appellate action on November 6, 2023, and we are currently awaiting a ruling from the Federal Circuit.
This patent infringement case was originally filed in the Middle District of Florida against Qualcomm and Qualcomm Atheros, Inc. (collectively “Qualcomm”), and HTC (HTC Corporation and HTC America, Inc.) (the “Qualcomm Action”) seeking unspecified damages and injunctive relief for infringement of certain of our patents. Certain of the defendants have filed counterclaims against us for non-infringement and invalidity for all patents in the case. A claim construction hearingMay 2014. The case was heldstayed in August 2015 but no ruling on claim construction has been issued by the court. In February 2016 the court granted the parties’ joint motion to stay these proceedings until resolution of the proceedings at the International Trade Commission (“ITC”) as discussed below. In May 2017, we filed a motion to continue the stay of these proceedings pending andecisions in other cases, including the appeal of certaina PTAB decisionsproceeding with regard to our U.S. Patent patent 6,091,940 (“the ‘940‘940 Patent”) as discussed below.
Qualcomm v. ParkerVision (PTAB)
In August 2015, Qualcomm filed an aggregate of ten petitions for Inter Partes Review (“IPR”) with the PTAB seeking to invalidate certain claims related to three of the eleven patents originally asserted in our Qualcomm Action.this case. In March 2016, the PTAB issued decisions denying institution of trial for three of the petitions, all of which relate to our U.S. patent 7,039,372 (“the ‘372 Patent”). The remaining petitions, all of which relate to the ‘940 Patent and U.S. patent 7,966,012 (“the ‘012 Patent”) were instituted for trial by the PTAB. In May 2016, the PTAB granted our motion to disclaim the challenged claims of the ‘012 Patent and entered an adverse judgment against us with respect to those claims. In March 2017, the PTAB issued its decisions on the six outstanding IPRs, all of which relate to the ‘940 Patent. The PTAB ruled in our favor on three of the six petitions (the method claims), ruled in Qualcomm’s favor on two of the six petitions (the apparatus claims) and issued a split decision on the claims covered in the sixth petition. In September 2018, the Federal Circuit upheld the PTAB’s decision with regard to the ‘940 Patent and, in January 2019, the court lifted the stay in this case. In July 2019, the court issued an order that granted our proposed selection of patent claims from four asserted patents, including the ‘940 Patent, and denied Qualcomm’s request to limit the claims and patents. The court also agreed that we may elect to pursue accused products that were at issue at the time the case was stayed, as well as new products that were released by Qualcomm during the pendency of the stay. In September 2019, Qualcomm filed a motion for partial summary judgment in an attempt to exclude certain patents from the case, including the ‘940 Patent. The court denied this motion in January 2020.
In April 2020, the court issued its claim construction order in which the court adopted our proposed construction for seven of the ten disputed terms and adopted slightly modified versions of our proposed construction for the remaining terms. Due to the impact of COVID-19, a number of the scheduled deadlines in this case were moved including the trial commencement date which was rescheduled from December 2020 to May 2021. In October 2020, our damages expert submitted a report supporting our damages ask of $1.3 billion for Qualcomm’s unauthorized use of our technology. Such amount excludes additional amounts requested by us for interest and enhanced damages for willful infringement. Ultimately, the amount of damages, if any, will be determined by the court. Discovery was expected to close in December 2020; however, the court allowed us to designate a substitute expert due to medical issues with one of our experts in the case. Accordingly, the close of discovery was delayed until January 2021. As a result of these delays, the court rescheduled the trial commencement date from May 3, 2021 to July 6, 2021.
In March 2021, the court further delayed the trial date citing backlog due to the pandemic, among other factors. A new trial date was not set and the court indicated the case was unlikely to be tried before November or December 2021. Fact and expert discovery was completed, expert reports were submitted, and summary judgment and Daubert briefings were submitted by the parties. Joint pre-trial statements were submitted in May 2021. In March 2021, the court granted Qualcomm’s motion to strike certain of our 2020 infringement contentions. As a result of this ruling, in July 2021, we filed a joint motion for entry of a judgment of non-infringement of our Patent No.7,865,177 (“the ‘177 Patent”), subject to appeal.
In January 2022, the court held a hearing to allow the parties to present their respective positions on three outstanding motions. In March 2022, the district court rulings in favor of Qualcomm closed the district court case, subject to our appeal. As a result of the PTAB decisions, certain claimscourt’s summary judgment motion in favor of Qualcomm, Qualcomm has the ‘940 Patent whichright to petition the court for its fees and costs. The court has granted a Qualcomm motion to delay such a petition until 30 days following the appellate court’s decision. We are the subject of our district courtrepresented in this case against Qualcomm and HTC were found to be un-patentable. In May 2017, we filed our notice of appeal of these decisions with the Federal Circuit. Qualcomm also cross-appealed. Briefing is complete and we expect oral arguments to be scheduled in the second or third quarter of 2018.on a full contingency fee basis.
ParkerVision v. Apple and Qualcomm (ITC)(Middle District of Florida-Jacksonville Division)
In December 2015, we filed a patent infringement complaint within the U.S. ITCMiddle District of Florida against Apple Inc. (“Apple”), LG Electronics, Inc., LG Electronics U.S.A., Inc., and LG Electronics MobileComm U.S.A., Inc. (collectively “LG”), Samsung Electronics Co., Ltd., Samsung Electronics America, Inc., Samsung Telecommunications America LLC, and Samsung Semiconductor, Inc. (collectively “Samsung”), and Qualcomm alleging that these companies make, use or sell products that infringe certaininfringement of four of our patent claims and requesting that patents. In February 2016, the ITC bar the defendants from continuing to import and sell infringing products in the U.S. We fileddistrict court proceedings were stayed pending resolution of a corresponding patent infringement complaint incase filed at the Middle District of Florida against these same defendants.International Trade Commission (“ITC”). In January 2016, the ITC instituted an investigation based on our complaint. In July 2016, we entered into a confidential patent license and settlement agreement with Samsung and, as a result, Samsung was removeddismissed from the ITCdistrict court action. In JanuaryMarch 2017, we dismissed three of the four patents from the case in order to simplify the investigation. On March 10, 2017, the administrative law judge issued a ruling on a pre-trial motion that precluded us from presenting key evidence in our case. As a result, on March 13, 2017, we filed a motion to terminate the ITC proceedings at the ITC. On April 28, 2017, the ITC granted our motion to withdraw from the ITC proceedings.
ParkerVision v. Apple and Qualcomm (Middle District of Florida)
In connection with our complaint filed at the ITC in December 2015 as discussed above, we filed a corresponding patent infringement complaint in the Middle District of Florida against Apple, LG, Samsung and Qualcomm alleging infringement of four of our patents. In February 2016, the district court proceedings were stayed pending resolution of the proceedings at the ITC and in July 2016, Samsung was removed from the district court action as a result of a patent license and settlement agreement. Following the termination of the ITC proceedings in March 2017, we filed a motion to lift the stay in the district court case. This motion was granted in May 2017. In July 2017, we filed a motion to dismiss LG from
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the district court case and re-filed our claims against LG in the District of New Jersey (see ParkerVision v. LG below). Also in July 2017, Qualcomm filed a motion to change venue to the southern districtSouthern District of California, and Apple filed a motion to dismiss for improper venue. In March 2018, the district court ruled against the Qualcomm and Apple motions. The parties also filed a joint motion in March 2018 to eliminate three of the four patents in the case in order to expedite proceedings. The parties are awaiting a revised court schedule forproceedings leaving our U.S. patent 9,118,528 as the proceedings, including theonly remaining patent in this case. A claim construction hearing was held on August 31, 2018. In July 2019, the court issued its claim construction order in which the court adopted our proposed claim construction for two of the six terms and the “plain and ordinary meaning” on the remaining terms. In addition, the court denied a motion filed by Apple for summary judgment. Fact discovery has closed in this case and a jury trial was originally scheduled for January 2018. to begin in August 2020. In March 2020, as a result of the impact of COVID-19, the parties filed a motion requesting an extension of certain deadlines in the case. In April 2020, the court stayed this proceeding pending the outcome of the infringement case against Qualcomm in the Orlando Division of the Middle District of Florida, which is currently pending an appeal.
ParkerVision v. LG (District of New Jersey)
In July 2017, we filed a patent infringement complaint in the districtDistrict of New Jersey against LG for the alleged infringement of the samefour patents previously asserted against LG in the middle districtMiddle District of Florida (see ParkerVision v. Apple and Qualcomm above). We elected to dismiss the case in the middle districtMiddle District of Florida and re-file in New Jersey as a result of a recent Supreme Court ruling regarding proper venue. In March 2018, the court stayed this case pending a final decision in ParkerVision v. Apple and Qualcomm in the Middle District of Florida. As part of this stay, LG has agreed to be bound by the final claim construction decision in that case.
ParkerVision v. LG Electronics (Munich, Germany)Intel (Western District of Texas)
In June 2016, weWe filed two patent infringement complaints in the Western District of Texas against Intel Corporation (“Intel”) in 2020, alleging infringement of approximately ten of our patents by Intel cellular, WiFi and Bluetooth products. The first case was scheduled for trial commencing February 6, 2023. Beginning in November 2022, the parties filed a complaintnumber of pre-trial motions. The court held hearings on these pre-trial motions in MunichJanuary 2023. The court issued its written orders with regard to these motions immediately prior to the February 6, 2023 trial start date. As a result of the court's pre-trial rulings, the potential damages in the case decreased significantly. On February 7, 2023, the parties resolved their outstanding dispute and we dismissed all pending actions against Intel.
ParkerVision v. TCL (Western District Courtof Texas)
We filed two patent infringement actions in the Western District of Texas in 2020 and 2021 against TCL Industries Holdings Co., Ltd, a Chinese company, TCL Electronics Holdings Ltd., Shenzhen TCL New Technology Co., Ltd, TCL King Electrical Appliances (Huizhou) Co., Ltd., TCL Moka Int’l Ltd. and TCL Moka Manufacturing S.A. DE C.V. (collectively “TCL”) alleging infringement of approximately twelve of our patents. The court issued its claim construction recommendations in the first TCL case, adopting our claim constructions in for nearly all of the disputed terms. In January 2023, the TCL action was stayed pending final resolution of patent infringement actions filed against Realtek, the manufacturer of the integrated circuits used in TCL's alleged infringing products.
ParkerVision v. LGE (Western District of Texas)
We filed a patent infringement action in the Western District of Texas against LG Electronics, Deutschland GmbH, a German subsidiarySouth Korean company ("LGE") in 2021, alleging infringement of LG Electronics, Inc. (“LGE”) seeking damagesten of our patents. The court issued its claim construction recommendations in June 2022, adopting our claim constructions for nearly all of the disputed terms. In January 2023, the LGE action was stayed pending final resolution of patent infringement actions filed against Realtek and injunctive reliefMediaTek as well as final resolution of IPR actions against patents in this case.
ParkerVision v. Realtek (Western District of Texas)
We filed two patent infringement actions in the Western District of Texas against Realtek Semiconductor Corp. ("Realtek"), the first in 2022 and a second in 2023, alleging infringement of an aggregate of seven of our patents. A claim construction hearing was held in January 2024 in the first Realtek action and the court adopted the majority of our claim constructions. A jury trial for thefirst Realtek action is currently scheduled for January 2025.
ParkerVision v. MediaTek (Western District of Texas)
We filed three patent infringement actions in the Western District of Texas against MediaTek Inc. and MediaTek USA Inc. (collectively, "MediaTek"), the first in 2022 and two additional cases in 2023, alleging infringement of an aggregate of ten of our patents. A claim construction hearing was held in January 2024 in the first MediaTek action and the court adopted the majority of our claim constructions. A jury trial for the first MediaTek action is currently scheduled for December 2024. The second MediaTek action has a tentative claim construction hearing date scheduled for May 2024 and jury trial in October 2025.
ParkerVision v. Texas Instruments (Western District of Texas)
We filed a patent infringement action in the Western District of Texas against Texas Instruments ("TI") in 2023, alleging infringement of three of our patents. In December 2023, TI filed a motion to change venue to the Northern District of Texas. A ruling has not yet been issued on this motion. A claim construction hearing is tentatively scheduled for May 2024 with a jury trial scheduled in May 2025.
ParkerVision v. NXP Semiconductors (Western District of Texas)
We filed a patent infringement action in the Western District of Texas against NXP Semiconductors ("NXP") in 2023, alleging infringement of three of our patents. A claim construction hearing is tentatively scheduled for May 2024 with a jury trial scheduled in August 2025.
Additional Patent Infringement Cases – Western District of Texas
ParkerVision filed a number of patent cases in the Western District of Texas in 2020 including cases against (i) Hisense Co., Ltd. and Hisense Visual Technology Co., Ltd (collectively “Hisense”), a Chinese company, (ii) Buffalo Inc., a Japanese company (“Buffalo”) and (iii) Zyxel Communications Corporation, a Chinese multinational electronics company headquartered in Taiwan, (“Zyxel”). Each case alleged infringement of the German partsame ten patents by products that incorporate modules containing certain WiFi semiconductors manufactured by Realtek and/or MediaTek. We dismissed the actions against Buffalo and Zyxel in 2021 following satisfaction of our Europeanthe parties' obligations under patent 1 206 831license and settlement agreements. In November 2022, we dismissed two cases against Hisense following satisfaction of the parties' obligations under a patent license and settlement agreement.
Intel (USPTO) v. ParkerVision (PTAB)
Intel filed IPR petitions against U.S. patent 7,539,474 (“the ‘831 Patent). A hearing‘474 Patent”), U.S. patent 7,110,444 ("the ‘444 Patent"), and U.S. patent 8,190,108 (“the ‘108 patent”) which were all patents asserted in this case was heldParkerVision v. Intel in November 2016 at which time the court concluded that certain LGE products using Qualcomm RF circuitry infringe our patent. TheWestern District of Texas. In January 2022, the PTAB issued its final decision for the '474 Patent, ruling in our favor with respect to the seven challenged claims. In January 2022, the PTAB also issued its final decision for the '444 Patent, determining that the single challenged claim of the '444 Patent was unpatentable. In July 2022, we appealed the PTAB decision on the '444 Patent to the Federal Circuit and in December 2023, the appellate court issued its written opinion affirming the PTAB's decision. In June 2022, the PTAB issued its final decision for the '108 Patent, determining that the challenged claims of the '108 Patent were unpatentable. We appealed this case is stayed pending decision and anticipate a hearing date on our appeal by April 2024. Following our February 2023 resolution of the corresponding nullity, or validity, action filed by Qualcomm ininfringement actions against Intel, Intel withdrew from the German FederalIPR cases; however the U.S. Patent Court in Munich (see Qualcomm v. ParkerVision below). If we do not prevail in this case, we may be subjectand Trademark Office ("USPTO") has exercised its right to a claim for reimbursement of statutory attorney’s fees and costs estimated at approximately $0.06 million for which we have posted a bond. If we prevail inintervene to defend the validity action filed by Qualcomm, the district court will then issue its final infringement decision which, if favorable, will likely include an injunction blocking the sale and importation of LGE products in Germany. PTAB's decisions.
In October 2016, we(PTAB)
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Qualcomm v. ParkerVision (Federal Patent Court in Germany)
In August 2016, Qualcomm filed a validity action in Federal Patent Court in Germany against the ’831 Patent. The outcome of this validity action impacts our German patent infringement cases against these parties in the Western District of Texas. In December 2021, LGE filed nearly identical petitions against the same two patents along with a joinder motion requesting to join the existing petitions, which was granted by the PTAB in April 2022. Oral hearings for these IPRs were held in September 2022. As part of a patent license and Applesettlement agreement entered into with Hisense in November 2022, Hisense withdrew its participation in these IPR proceedings. In November 2022, the PTAB issued its written decision ruling that the challenged claims for both patents were unpatentable. We have appealed these decisions and anticipate hearing dates on our appeal by April 2024.
14.STOCK AUTHORIZATION AND ISSUANCE
Preferred Stock
We have 15 million shares of preferred stock authorized for issuance at the direction of our board of directors (the “Board”). On November 17,2005, our Board designated 0.1 million shares of authorized preferred stock as discussed above. An oral hearingthe Series E Preferred Stock in conjunction with its adoption of a Shareholder Protection Rights Agreement that expired in November 2023. As of December 31, 2023, we had no outstanding preferred stock.
Common Stock
We have 175 million shares of common stock authorized for issuance as of December 31, 2023. Our shareholders approved amendments to our articles of incorporation in September 2022 increasing the number of our authorized shares of common stock from 150 million to 175 million shares.
As of December 31, 2023, we have 36.4 million shares reserved for issuance under outstanding warrants and options and 36.4 million shares reserved for issuance upon conversion of our outstanding convertible notes. In addition, we have 1.1 million shares reserved for future issuance under equity compensation plans and 1.4 million shares reserved for future issuance upon payment of interest in-kind on our convertible notes.
Stock and Warrant Issuances – Equity Based Financings
The following table presents a summary of completed equity-based financing transactions for the years ended December 31, 2023 and 2022 (in thousands, except for per share amounts):
Date | Transaction | # of Common Shares/ Units Sold | Average Price per Share/ Unit | Net Proceeds (1) | |||||||||
November 2022 | Private placement of common stock | 1,000 | $ | 0.20 | $ | 200 | |||||||
December 2022 | Private placement of common stock | 1,000 | $ | 0.20 | $ | 200 | |||||||
January 2023 | Private placement of common stock | 844 | $ | 0.16 | $ | 120 | |||||||
(1) | After deduction of applicable offering costs. |
Private Placements
In January 2023, we entered into securities purchase agreements with accredited investors for the sale of an aggregate of 843,750 shares of our common stock at a price of $0.16 per share for aggregate gross proceeds of $0.14 million, including 62,500 shares to Sanford Litvack, a member of our Board of Directors. The shares were registered for resale on a registration statement that was declared effective on May 11, 2023 (File No.333-271651). In November and December 2022, we entered into securities purchase agreements with accredited investors for the sale of 2,000,000 shares of our common stock at a price of $0.20 per share for aggregate proceeds of $0.4 million. The shares were registered for resale on a registration statement that was declared effective on May 11, 2023 (File No.333-271351).
Stock, Option and Warrant Issuances – Payment for Services
In April 2023, we entered into a consulting services agreement with Lewis Titterton to provide short-term advisory services to our chief executive officer in connection with the restructuring of the Brickell funding agreements. As consideration for services under the agreement, we issued 250,000 unregistered shares of our common stock valued at approximately $0.03 million. The consideration was recognized fully in the second quarter of 2023, prior to Mr. Titterton being appointed to the Board (see Note 16).
In January 2023, we extended a prior consulting agreement with Intro-Act to provide research and shareholder relations services. We issued 75,000 shares of unregistered common stock valued at approximately $0.02 million as consideration for services to be provided during the first quarter of 2023. The agreement had been previously extended in August 2022 with the issuance of 150,000 shares of unregistered common stock valued at approximately $0.03 million as consideration for services provided over a six-month term.
On November 22, 2022, we entered into an agreement with a third party to provide consulting services. As consideration for services provided under the twelve-month term of the agreement, we issued non-plan options to purchase 200,000 shares of unregistered common stock at an exercise price of $0.21 per share valued at approximately $0.03 million. The options vest in four equal three-month increments beginning November 22, 2022 and will expire three years from the date of the grant. The value of the stock issued was recognized as a consulting expense over the term of the agreement. The shares underlying the options were registered on a registration statement that was declared effective May 11, 2023 (File No.333-271651).
In October 2022, we entered into an agreement with Tailwinds Research Group LLC (“Tailwinds”) to provide continuing digital marketing services to us through December 2024. As consideration for services to be provided under the term of the agreement, we extended the expiration date for warrants previously issued to Tailwinds in 2020 under a prior services agreement. The warrants allow for the purchase of up to 200,000 shares of our common stock at an exercise price of $1.00 per share and the expiration date was extended from March 2023 to March 2026. The fair value of the modification of the warrants was valued at approximately $0.02 million using the Black-Scholes method. The expense was being recognized ratably over the term of the new agreement. In June 2023, we terminated the services agreement and recognized all remaining unamortized expense.
In addition, from time to time, we issue share-based compensation awards under our equity compensation plans to third-party consultants. During the year ended December 31, 2023, we issued an aggregate of 170,000 RSAs valued at approximately $0.05 million under our 2019 Long-Term Equity Incentive Plan to two non-employees as compensation under consulting agreements. (See Note 15).
Common Stock Warrants
On December 18, 2023, we modified a 2018 warrant agreement with Brickell for the purchase of up to 3.0 million shares of our common stock at $0.16 per share. The modification provides for the extension of the expiration date of the outstanding warrants by 18 months, from December 20, 2023, to June 20, 2025. All other terms of the warrant agreement remain unchanged, including a call provision whereby if the closing price of our common stock for any period of five (5) consecutive trading days exceeds two times the exercise price, then we can call for the cancellation of all or a portion of the warrants for which a notice of exercise has not been delivered within five (5) trading days of our delivery of a call notice to Brickell. The modification resulted in an increase in the fair value of the warrants of $0.3 million, which was recorded as an increase in additional paid in capital and an increase in deferred offering costs, included in other assets, in the accompanying consolidated financial statements at December 31, 2023.
We had outstanding warrants for the purchase of up to 10.3 million shares of our common stock as of December 31, 2023 and 2022. The estimated grant date fair value of these warrants of $3.5 million and $3.2 million for the years ended December 31, 2023 and 2022, respectively, is scheduledincluded in this case on October 17, 2018shareholders’ deficit in our consolidated balance sheets. As of December 31, 2023, our outstanding warrants have an average exercise price of $0.75 per share and a decisionweighted average remaining life of approximately 1.5 years.
15.SHARE-BASED COMPENSATION
For the years ended December 31, 2023 and 2022, we recognized share-based compensation expense of approximately $0.5 million and $3.1 million, respectively. Share-based compensation is included in selling, general, and administrative expenses in our consolidated statements of comprehensive income (loss). As of December 31, 2023, there was $0.15 million of total unrecognized compensation cost related to all non-vested share-based compensation awards. That cost is expected to be handed down at that time. The Federal Patent Court can uphold the ‘831 Patent, declare the ‘831 Patent to be invalid, or, alternatively, can uphold the ‘831 Patent with amended, narrowed claims that we have proposed. If the ‘831 Patent is declared invalid, we would be subject torecognized over a claim for reimbursement of statutory attorney fees and costsweighted-average period of approximately $0.2 million. 1.4 years.
ParkerVision v. Apple (Munich, Germany)-Stock Incentive Plans
2019 Long-Term Incentive Equity Plan
We adopted a long-term incentive equity plan in August 2019 that, as amended in January 2021 and January 2023, provides for the Apple II casegrant of stock-based awards to employees, officers, directors, and consultants, not to exceed 30.0 million shares of common stock (the “2019 Plan”). The 2019 Plan provides for benefits in the form of nonqualified stock options, stock appreciation rights, restricted stock awards, and other stock-based awards. Forfeited and expired options under the 2019 Plan become available for reissuance. The plan provides that non-employee directors may not be granted awards during any calendar year that exceed the lesser of 1.0 million shares or $175,000 in value, calculated based on grant-date fair value. At December 31, 2023, we had outstanding options for the purchase of up to 24,730,086 shares and we had 1,136,467 shares of common stock available for future grants under the 2019 Plan.
2011 Long-Term Incentive Equity Plan
We adopted a shareholder approved long-term incentive equity plan in September 2011 that was amended in 2014,2016 and 2017 and provided for the grant of stock-based awards to employees, officers, directors and consultants, not to exceed 3.0 million shares of common stock (the “2011 Plan”). In January 2023, we ceased any future grants under the 2011 Plan. At December 31, 2023, we had outstanding options for the purchase of up to 1,103,969 shares under the 2011 Plan. Upon the exercise or expiration of these remaining outstanding options, the 2011 Plan will be terminated.
2008 Equity Incentive Plan
We adopted an equity incentive plan in August 2008 (the “2008 Plan”) for the grant of stock-based awards to employees (excluding named executives), directors and consultants, not to exceed 50,000 shares of common stock. We had no outstanding options for purchase of shares under the 2008 Plan and in January 2023, the 2008 Plan was terminated.
Restricted Stock Awards
RSAs are issued as executive and employee incentive compensation and as payment for services to others. The value of the award is based on the closing price of our common stock on the date of grant. RSAs are generally immediately vested. From time to time, we issue fully vested share-based compensation awards to third parties as prepaid retainers for services over a specified period. The grant date fair value of these awards is recorded as prepaid services and expensed to selling, general and administrative expense over the service period (see Note 5).
Restricted Stock Units
RSUs are issued as incentive compensation to executives, employees, and non-employee directors. Each RSU represents a right to one share of our common stock, upon vesting. The RSUs are not entitled to voting rights or dividends, if any, until vested. RSUs generally vest over a one to three year period for employee awards and a one year period for non-employee director awards. The fair value of RSUs is generally based on the closing price of our common stock on the date of grant and is amortized to share-based compensation expense over the estimated life of the award, generally the vesting period.
RSAs and RSUs
The Apple II case seeks damagesfollowing table presents a summary of RSA and injunctive reliefRSU activity under the 2011 and 2019 Plans (collectively, the “Stock Plans”) as of December 31, 2023 (shares in thousands):
Non-vested Shares | ||||||||
Shares | Weighted-Average Grant Date Fair Value | |||||||
Non-vested at beginning of year | - | |||||||
Granted | 370 | 0.30 | ||||||
Vested | (370 | ) | 0.30 | |||||
Forfeited | - | - | ||||||
Non-vested at end of year | - | $ | - | |||||
The total fair value of RSAs and RSUs vested under the Stock Plans for the alleged infringement of the German part of our European patent 1 135 853 (“the ‘853 Patent). A hearingyears ended December 31, 2023 and 2022 was held in November 2017. Subsequent to the hearing, the court requested that we supplement certain elements of the infringement claims against Apple devices. The court also denied Apple’s request that we provide a bond covering any possible claims for reimbursement of statutory attorney’s fees and costs; however, in order to expedite proceedings, we have agreed to pay a bond of approximately $0.1 million in April 2018, whichand $0.03 million, respectively.
Stock Options
Stock options are issued as incentive compensation to executives, employees, consultants and non-employee directors. Stock options are granted with exercise prices at or above fair market value of the underlying shares at the date of grant. Fair market value of the underlying shares is ourdetermined based on observable market prices at the date of the grant. The fair value of options granted is estimated maximum exposure in this case. We expect a second oral hearing in this case to take place inusing the second quarterBlack-Scholes option pricing model. Generally, fair value is determined as of 2018. the grant date. Options for employees, including executives and non-employee directors, are generally granted under the Stock Plans.
Intel v. ParkerVision(Federal Patent CourtThe following table presents a summary of option activity under the Stock Plans for the year ended December 31, 2023 (shares in Germany)thousands):
Shares | Weighted- Average Exercise Price | Weighted-Average Remaining Contractual Term (in years) | Aggregate Intrinsic Value ($) | |||||||||||||
Outstanding at beginning of year | 24,180 | $ | 0.41 | |||||||||||||
Granted | 2,000 | 0.26 | ||||||||||||||
Exercised | (21 | ) | 0.17 | |||||||||||||
Forfeited/Expired | (325 | ) | 0.86 | |||||||||||||
Outstanding at end of year | 25,834 | 0.40 | 2.5 | $ | - | |||||||||||
Vested at end of year | 24,659 | $ | 0.40 | 2.4 | $ | - | ||||||||||
In August 2017, Intel filed a nullity action in German Federal Patent Court claiming invalidityThe weighted average per share fair value of options granted under the Stock Plans during the years ended December 31, 2023 and 2022 was $0.24 and $0.17, respectively. The total fair value of option shares vested was $0.4 million and $3.0 million for the years ended December 31, 2023 and 2022, respectively.
The fair value of option grants under the Stock Plans for the years ended December 31, 2023 and 2022, respectively, was estimated using the Black-Scholes option-pricing model with the following assumptions:
Year ended December 31, | ||||||
2023 | 2022 | |||||
Expected option term (in years) 1 | 5 | 5 | ||||
Expected volatility factor 2 | 150.9 - 155.9% | 143.9 - 155.9% | ||||
Risk-free interest rate 3 | 3.60 - 4.45% | 3.05 - 4.09% | ||||
Expected annual dividend yield | 0% | 0% | ||||
1 The expected term was generally determined based on historical activity for grants with similar terms and for similar groups of employees and represents the period of time that options are expected to be outstanding. For employee options, groups of employees with similar historical exercise behavior are considered separately for valuation purposes.
2 The stock volatility for each grant is measured using the weighted average of historical daily price changes of our common stock over the most recent period equal to the expected option life of the ‘853 Patent that isgrant.
3 The risk-free interest rate for periods equal to the subjectexpected term of the Apple II case. Ifshare option is based on the ‘853 Patent is declared invalid, we would be subject to a claim for reimbursementU.S. Treasury yield curve in effect at the measurement date.
Options by Price Range
The options outstanding at December 31, 2023 under the Stock Plans have exercise price ranges, weighted average contractual lives, and costs of approximately $0.2 million. weighted average exercise prices as follows (weighted average lives in years and shares in thousands):
Options Outstanding | Options Vested | |||||||||||||||||||||||
Range of Exercise Prices | Number Outstanding at December 31, 2023 | Wtd. Avg. Exercise Price | Wtd. Avg. Remaining Contractual Life | Number Exercisable at December 31, 2023 | Wtd. Avg. Exercise Price | Wtd. Avg. Remaining Contractual Life | ||||||||||||||||||
$0.171 - $0.3001 | 11,458 | $ | 0.19 | 3.1 | 10,283 | $ | 0.18 | 3.0 | ||||||||||||||||
$0.33 - $0.495 | 550 | 0.33 | 3.1 | 550 | 0.33 | 3.1 | ||||||||||||||||||
$0.50 - $0.75 | 13,553 | 0.54 | 2.0 | 13,553 | 0.54 | 2.0 | ||||||||||||||||||
$1.98 - $2.97 | 273 | 1.98 | 0.6 | 273 | 1.98 | 0.6 | ||||||||||||||||||
| 25,834 | $ | 0.40 | 2.5 | 24,659 | $ | 0.40 | 2.4 | |||||||||||||||||
We intend to vigorously defend the validityissue new shares of our patent. No dates have yet been set in this nullity action. common stock upon exercise of options or vesting of RSUs or RSAs under the Stock Plans. The shares underlying the Stock Plans are registered. Cash received from option exercises for the years ended December 31, 2023 and 2022, was $0.004 million and $0.083 million, respectively.
16.RELATED PARTY TRANSACTIONS
14. RELATED PARTY TRANSACTIONS
We paid approximately $0.03$0.05 million and $0.4$0.01 million in 20172023 and 2016,2022, respectively, for patent-related legal services to the law firm of Sterne, Kessler, Goldstein & Fox, PLLC (“SKGF”),SKGF, of which Robert Sterne, one of our directors since September 2006, is a partner. In February 2016,addition, we entered into an agreement with SKGF to convert $0.8paid approximately $0.2 million and $0.1 million in 2023 and 2022, respectively, for principal and interest on the SKGF Note (see Note 8). The SKGF Note has an outstanding unpaid fees to an unsecured note payable. balance, including accrued interest, of approximately $0.5 million at December 31, 2023.
In December 2017, April 2023, we entered into a note modificationconsulting services agreement with SKGFLewis Titterton to extendprovide short-term advisory services to our chief executive officer in connection with the maturity daterestructuring of the note from December 31, 2017 to March 31, 2020 (see Note 8). We paid SKGF interest onBrickell funding agreements. As consideration for services under the note payable of approximately $0.07 million and $0.06 million in 2017 and 2016, respectively.
In February 2017, Mr. Paul Rosenbaum, one of our directors since December 2016, purchased 80,510agreement, we issued 250,000 unregistered shares of our common stock valued at approximately $0.03 million. The consideration was recognized fully in the second quarter of 2023, prior to Mr. Titterton being appointed to the Board. As of December 31, 2023, Mr. Titterton holds an unregistered saleaggregate of equity securities$0.33 million in promissory notes, convertible into 2.7 million shares of common stock, that were purchased from 2019 to 2022 prior to being appointed to the Board.
In May 2022, we sold an aggregate of $0.1 million in promissory notes, convertible into shares of our common stock at a purchasefixed conversion price of $2.11$0.13 to Paul Rosenbaum, one of our directors. In September 2023, we sold an additional $0.1 million in promissory notes, convertible into shares of our common stock at a fixed conversion price of $0.25 to Mr. Rosenbaum. As of December 31, 2023, Mr. Rosenbaum holds $0.2 million of our convertible promissory notes convertible into 1.2 million shares of common stock.
In August 2022, we sold an aggregate of $0.03 million in promissory notes, convertible into approximately 0.2 million shares of our common stock at a fixed conversion price of $0.13 to Sanford Litvack, who became an independent director in October 2022. In January 2023, Mr. Litvack purchased 62,500 shares of our common stock at $0.16 per share (see Note 11).in a private placement transaction.
15. 17.CONCENTRATIONS OF CREDIT RISK
Financial instruments that potentially subject us to a concentration of credit risk principally consist of cash and cash equivalents, restricted cash equivalents, and our available for sale securities.equivalents. Cash and cash equivalents are primarily held in bank accounts and overnight investments. At times our cash balances on deposit with banks may exceed the balance insured by the F.D.I.C. Restricted cash equivalents are held in accounts with brokerage institutions and consist of short-term money market funds. Our available-for-sale securities are held in accounts with brokerage institutions and consist of mutual funds invested primarily in short-term municipal securities.
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We maintain our investments with what management believes to be quality financial institutions and while we limit the amount of credit exposure to any one institution, we could be subject to credit risks from concentration of investments in a single fund as well as credit risks arising from adverse conditions in the financial markets as a whole.
16. FAIR VALUE MEASUREMENTS
ASC 820, “Fair Value Measures” establishes a fair value hierarchy that prioritizes the inputs to valuation methods used to measure fair value. The three levels of the fair value hierarchy are as follows:Federal Deposit Insurance Corporation (F.D.I.C.).
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The following table summarizes financial assets and financial liabilities carried at fair value and measured on a recurring basis as of December 31, 2017 and 2016, segregated by classification within the fair value hierarchy (in thousands):
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| Quoted Prices in Active Markets (Level 1) |
| Significant Other |
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December 31, 2017: |
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Assets: |
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Available-for-sale securities | $ | 26 |
| $ | 26 |
| $ | - |
| $ | - |
Restricted cash equivalents |
| 1,000 |
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| 1,000 |
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| - |
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Liabilities: |
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Secured contingent payment |
| 15,896 |
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| 15,896 |
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December 31, 2016: |
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Assets: |
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Available-for-sale securities | $ | 14 |
| $ | 14 |
| $ | - |
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Restricted cash equivalents |
| 911 |
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| 911 |
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Liabilities: |
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Secured contingent payment |
| 14,185 |
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For the years ended December 31, 2017 and 2016, respectively, we had no transfers of assets or liabilities between the levels of the hierarchy. We determine the fair value of our available-for-sale securities and restricted cash equivalents using a market approach based on quoted prices in active markets (Level 1 inputs).
In 2016, we recognized a secured contingent payment obligation upon our receipt of proceeds from BKI for funding of certain patent-related actions (see Note 8). The fair value of the contingent payment obligation at December 31, 2017 was estimated at $15.9 million using a probability-weighted income approach based on various cash flow scenarios as to the outcome of patent-related actions both in terms of timing and amount, discounted to present value using a risk-adjusted rate. The contingent payment obligation does not have a fixed duration; however our cash flow projections assume a duration ranging from 2018 through 2021. The assumed cash outflows range from $0 to $34 million and the cash flow
56
scenarios have probabilities of 0% to 30%. We used a risk-adjusted discount rate of approximately 16%, based on a five year risk-free rate of approximately 2% as adjusted by 8% for credit risk and 6% for litigation inherent risk. Changes in any of these Level 3 inputs could result in a higher or lower fair value measurement. For example, a decrease in the risk-adjusted discount rate from 16% to 8% would result in an increase in the fair value of approximately $3 million. Refer to Note 8 for a reconciliation of our secured contingent payment obligation measured at estimated fair value for the years ended December 31, 2017 and 2016.
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PARKERVISION, INC. AND SUBSIDIARY
VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 2017 AND 2016
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Valuation Allowance for Income Taxes |
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Year ended December 31, 2016 |
| 122,152 |
| 8,145 |
| (1,072) |
| 129,225 |
Year ended December 31, 2017 |
| 129,225 |
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| 94,415 |
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Item 9. ChangesChanges in and Disagreements with Accountants on Accounting and Financial Disclosure.
None.
Item 9A. ControlsControls and Procedures.
Evaluation of Disclosure Controls and Procedures
Under Rules 13a-15(e) and 15d-15(e) of the Exchange Act, “disclosure controls and procedures” are controls and other procedures that are designed to ensure that the information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified under the rules and forms of the SEC. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that such information is accumulated and communicated to our management, including our chief executive officer and our chief financial officer, as appropriate to allow timely decisions regarding required disclosures. Our management, with the participation of our chief executive officer and our chief financial officer, has evaluated the effectiveness of our disclosure controls and procedures as of December 31, 2017.
2023. Based on such evaluation, our chief executive officer and our chief financial officer have concluded that as of December 31, 2017,2023, our disclosure controls and procedures were effective.
Management’s Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting and for the assessment of the effectiveness of internal control over financial reporting. Under Rules 13a-15(f) and 15d-15(f) of the Exchange Act, “internal control over financial reporting’’ is defined as a process designed by, or under the supervision of, our chief executive officer and our chief financial officer, and effected by our board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of our financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.
Internal control over financial reporting includes policies and procedures that pertain to the maintenance of records, that in reasonable detail, accurately and fairly reflect our transactions and our dispositions of assets; provide reasonable assurance that transactions are recorded as necessary to permit preparation of our financial statements in accordance with generally accepted accounting; provide reasonable assurance that receipts and expenditures of the companyCompany are made only in accordance with authorizations of management and directors; and provide reasonable assurance regarding the prevention or the timely detection of the unauthorized acquisition, use or disposition of the company’sCompany’s assets that could have a material effect on our financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies and procedures may deteriorate.
Management, with the participation of our chief executive officer and our chief financial officer, conducted an evaluation of the effectiveness of our internal control over financial reporting as of December 31, 20172023 using the criteria established in Internal Control—Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013. Based on this evaluation, management concluded as of December 31, 2017,that our internal control over financial reporting was effective.effective as of December 31, 2023.
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Changes in Internal Control over Financial Reporting
We implemented a number of internal controls related to inventory management, sales, and accounts receivable in the fourth quarter of 2017.
Other than as noted above, thereThere were no changes in our internal control over financial reporting during the fiscal quarter ended December 31, 20172023 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
None.
Item 9B. Ot9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.
Not applicable.
Item 10. Directors, Executive Officers and Corporate Governance.
Directors
Our Board is divided into three classes with only one class of directors typically being elected in each year and each class serving a three-year term. In October 2022, our Board approved an increase in the size of our Board from four to five members. Effective the same date, the Board appointed Mr. Sanford M. Litvack to fill the newly created vacancy. Mr. Litvack was approved by a vote of our shareholders at our 2023 annual meeting.
In accordanceaddition, in March 2023, our Class II director, Frank Newman, resigned, leaving a vacancy. On June 22, 2023, the Board appointed Lewis H. Titterton to fill the vacancy. Pursuant to Florida law and our bylaws, any directors appointed by the Board to fill a vacancy serve only until the next Annual Meeting. Accordingly, Mr. Titterton was approved by a vote of our shareholders at our 2023 annual meeting to serve as a Class II director until the term of our Class II directors ends at the 2024 annual meeting.
Our current directors, including their backgrounds and qualifications are as follows:
Name | Age | Position with the Company | ||
Sanford M. Litvack | 87 | Class I Director, Audit Committee Member, Compensation Committee Member | ||
Jeffrey L. Parker | 67 | Class I Director, Chairman of the Board and Chief Executive Officer | ||
Paul A. Rosenbaum | 81 | Class III Director, Audit Committee Chair, Compensation Committee Member | ||
Robert G. Sterne | 72 | Class III Director | ||
Lewis H. Titterton | 79 | Class II Director, Audit Committee Member, Compensation Committee Chair | ||
Sanford M. Litvack
Sanford "Sandy" Litvack has been a director of ours and a member of our audit committee since October 2022 and was appointed to our compensation committee in April 2023. Mr. Litvack is a partner with Chaffetz Lindsey LLP and satisfactionhas a broad corporate litigation background, handling a wide array of complex matters, including patent and other intellectual property issues. Mr. Litvack served as Assistant Attorney General in charge of the requirementsAntiturst Division of Form 8-K, we include the following disclosure:Department of Justice and was selected by President George W. Bush to serve as a member of the Antitrust Modernization Commission. In addition to his courtroom experience, Mr. Litvack spent a decade at the Walt Disney Company holding various roles from general counsel to chief of corporate operations and vice chairman of the board of directors. He is also a former director of Hewlett Packard. Mr. Litvack has served on the board of directors for L Catterton Asia Acquisition Corp., a special purpose acquisition company, since August 2022. Mr. Litvack's corporate and legal background provides relevant insight into patent litigation and other legal strategies as well as the operations of, and risks associated with, a publicly-held corporation.
OnJeffrey L. Parker
Jeffrey Parker has been the Chairman of our Board and our Chief Executive Officer since our inception in August 1989 and was our president from April 1993 to June 1998. From March 29,1983 to August 1989, Mr. Parker served as executive vice president for Parker Electronics, Inc., a joint venture partner with Carrier Corporation performing research, development, manufacturing, and sales and marketing for the heating, ventilation and air conditioning industry. Mr. Parker is a named inventor on 31 U.S. patents. Among other qualifications, as Chief Executive Officer, Mr. Parker has relevant insight into our operations, our industry, and related risks as well as experience bringing disruptive technologies to market.
Paul A. Rosenbaum
Paul A. Rosenbaum has been a director of ours since December 2016, a member of our audit committee since September 2018, we issuedand a press release announcingmember of our resultscompensation committee since April 2023. Mr. Rosenbaum has extensive experience as a director and executive officer for both public and private companies in a number of industries. Since 1994, Mr. Rosenbaum has served as chief executive of SWR Corporation, a privately-held corporation that designs, sells, and markets specialty industrial chemicals. Since 2009, Mr. Rosenbaum has been a member of the Providence St. Vincent Medical Foundation Council of Trustees, and previously served as president of the Council. In addition, from September 2000 until June 2009, Mr. Rosenbaum served as chairman and chief executive officer of Rentrak Corporation (“Rentrak”), a Nasdaq publicly traded company that provides transactional media measurement and analytical services to the entertainment and media industry. From June 2009 until July 2011, Mr. Rosenbaum served in a non-executive capacity as chairman of Rentrak. From 2007 until 2016, Mr. Rosenbaum served on the Board of Commissioners for the Port of Portland, including as vice chairman from 2012 to 2016. In September 2017, Mr. Rosenbaum was appointed to the Board of Commissioners for the Oregon Liquor Control Commission and served as chairman through January of 2023. Mr. Rosenbaum was chief partner in the Rosenbaum Law Center from 1978 to 2000 and served in the Michigan Legislature from 1972 to 1978, during which time he chaired the Michigan House Judiciary Committee, was legal counsel to the Speaker of the House of the state of Michigan and wrote and sponsored the Michigan Administrative Procedures Act. Additionally, Mr. Rosenbaum served on the National Conference of Commissioners on Uniform State Laws, as vice chairman of the Criminal Justice and Consumer Affairs Committee of the National Conference of State Legislatures, and on a committee of the Michigan Supreme Court responsible for reviewing local court rules. Among other qualifications, Mr. Rosenbaum has extensive experience as a director and executive officer of a publicly held corporation and has relevant insights into operations and our litigation strategies.
Robert G. Sterne
Robert Sterne has been a director of ours since September 2006 and also served as a director of ours from February 2000 to June 2003. Since 1978, Mr. Sterne has been a partner of the law firm of Sterne, Kessler, Goldstein & Fox PLLC, specializing in patent and other intellectual property law. Mr. Sterne provides legal services to us as one of our patent and intellectual property attorneys. Mr. Sterne has co-authored numerous publications related to patent litigation strategies. He has received multiple awards for contributions to intellectual property law including Law 360’s 2016 Top 25 Icons of IP and the Financial Times 2015 Top 10 Legal Innovators in North America. Among other qualifications, Mr. Sterne has an in-depth knowledge of our intellectual property portfolio and patent strategies and is considered a leader in best practices and board responsibilities concerning intellectual property.
Lewis H. Titterton
Lewis Titterton was appointed to our Board in June 2023. He previously served on our Board, and was a member of our audit committee, from September 2018 to April 2019 when he resigned due to family medical reasons. Mr. Titterton has served on the board of directors of Anixa Biosciences ("ANIX"), a Nasdaq biotech company, since July 2017, including as lead independent director since July 2018 and chairman of the board from 2012 to 2016. His background is in high technology with an emphasis on health care and he was the chairman of the board of directors of NYMED, Inc., a diversified health services company, from 1989 until October 2018. Mr. Titterton founded MedE America, Inc. in 1986 and was the chief executive officer of Management and Planning Services, Inc. from 1978 to 1986. He holds an MBA from the State University of New York at Albany, and a B.A. degree from Cornell University. Mr. Titterton has extensive experience as an executive and director of a publicly held corporation and, with a background in biotech, has an in-depth understanding of the unique challenges that parallel those of an innovative technology company.
Information About Our Executive Officers
Our current executive officers are as follows:
Name | Age | Position with the Company | ||
Jeffrey Parker | 67 | Chairman of the Board and Chief Executive Officer (“CEO”) | ||
Cynthia French | 57 | Chief Financial Officer and Corporate Secretary (“CFO”) | ||
The background for Mr. Jeffrey Parker is included above under the heading “Directors”.
Cynthia French (formerly Poehlman)
Cynthia French has been our chief financial condition forofficer since June 2004 and our corporate secretary since August 2007. From March 1994 to June 2004, Ms. French was our controller and our chief accounting officer. Ms. French has been a certified public accountant in the state of Florida since 1989.
Family Relationships
There are no family relationships among our officers or directors.
Delinquent Section 16(a) Reports
Section 16(a) of the Exchange Act requires our officers, directors and persons who beneficially own more than ten percent of our common stock to file reports of ownership and changes in ownership with the SEC. Based solely upon a review of such forms and written representations received by the Company from certain reporting persons, we believe that during the year ended December 31, 2017. 2023 all Section 16(a) filing requirements were complied with in a timely manner with the exception of one Form 4 filed on November 22, 2023 reporting the grant of a nonqualified stock option to Lewis Titterton, which was inadvertently filed one day late.
Code of Ethics
The press releaseBoard has adopted a code of ethics applicable to all of our directors, officers and employees, including our chief executive officer and our chief financial and accounting officer, that is attached heretodesigned to deter wrongdoing and to promote honest and ethical conduct, full, fair, accurate, timely and understandable disclosure in reports that we file or submit to the SEC and in our other public communications, compliance with applicable government laws, rules and regulations, prompt internal reporting of violations of the code to an appropriate person designated in the code and accountability for adherence to the code. A copy of the code of ethics may be found on our website at www.parkervision.com.
Shareholder Nominations
There have been no material changes to the procedures by which security holders may recommend nominees to our Board.
Audit Committee and Financial Expert
Our audit committee is chaired by Mr. Rosenbaum and Messrs. Litvack and Titterton serve as Exhibit 99.1.members of the audit committee. Our audit committee is governed by a Board-approved charter which, among other things, establishes the audit committee’s membership requirements and its powers and responsibilities. Our Board has determined that Messrs. Litvack, Titterton, and Rosenbaum are audit committee financial experts within the meaning of the rules and regulations of the SEC.
Item 11. Executive Compensation.
Summary Compensation Table
The following table summarizes the total compensation of each of our “named executive officers” as defined in Item 402(m) of Regulation S-K (the “Executives”) for the fiscal years ended December 31, 2023 and 2022. Given the complexity of disclosure requirements concerning executive compensation, and in particular with respect to the standards of financial accounting and reporting related to equity compensation, there is a difference between the compensation that is reported in this table versus that which is actually paid to and received by the Executives. The amounts in the Summary Compensation Table that reflect the full grant date fair value of an equity award, do not necessarily correspond to the actual value that has been realized or will be realized in the future with respect to these awards.
(a) | (b) | (c) | (d) | (e) | (f) | (g) | (h) | ||||||||||||||||||
Name and Principal Position | Year | Salary | Bonus ($) | Stock Awards | Option Awards | All Other | Total | ||||||||||||||||||
Jeffrey Parker, CEO | 2023 | $ | 260,000 | $ | 111,000 | $ | 60,020 | $ | - | $ | 24,000 | 2 | $ | 455,020 | |||||||||||
2022 | 260,000 | - | - | - | 24,000 | 2 | 284,000 | ||||||||||||||||||
Cynthia French, CFO | 2023 | 180,000 | 45,000 | - | - | - | 225,000 | ||||||||||||||||||
2022 | 180,000 | 20,000 | 30,000 | - | - | 230,000 | |||||||||||||||||||
1. | The amounts represented in columns (e) and (f) represent the full grant date fair value of equity awards in accordance with ASC 718. Refer to Note 15 to the consolidated financial statements for the year ended December 31, 2023 included in Item 8 for the assumptions made in the valuation of equity awards. |
2. | Represents an automobile allowance in the amount of $24,000, paid biweekly. |
In July 2022, the Board approved a performance bonus for Ms. French that included $20,000 cash and 166,390 immediately vested shares of our common stock in consideration for the substantial savings in outside professional fees Ms. French has enabled by bringing significant activities in-house.
In January 2023, the Board approved a performance bonus for Mr. Parker that included $40,000 cash and 200,000 immediately vested shares of our common stock in consideration for Mr. Parker's continued contribution to the Company and the continuation of his voluntary reduction in base salary of $60,000 annually since July 2018. In July 2023, the compensation committee of the Board approved cash bonuses for Mr. Parker and Ms. French of $71,000 and $45,000, respectively. The bonuses were awarded in consideration of, among other things, each of their contributions to the Company's successful intellectual property protection and monetization program and their continuation of approximately 20% voluntary base salary reductions since 2018.
We do not have employment agreements with any of our Executives. We have non-compete arrangements in place with all of our employees, including our Executives, that impose post-termination restrictions on (i) employment or consultation with competing companies or customers, (ii) recruiting or hiring employees for a competing company, and (iii) soliciting or accepting business from our customers. We terminated our tax-qualified defined contribution 401(k) plan in 2023 for all of our employees, including our Executives. We did not make any employer contributions to the 401(k) plan in 2023 or 2022.
Outstanding Equity Awards at Fiscal Year End
The foregoingfollowing table summarizes information concerning the outstanding equity awards, including unexercised options, unvested stock and equity incentive awards, as of December 31, 2023 for each of our Executives:
Option Awards | |||||||||||||
Number of securities underlying unexercised options (#) exercisable | Number of securities underlying unexercised options (#) unexercisable | Option Exercise Price ($) | Option Expiration Date | ||||||||||
Name | (a) | (b) | (c) | (d) | |||||||||
Jeffrey Parker | 20,000 | 1 | - | 1.98 | 8/15/2024 | ||||||||
| 2,660,000 | 2, 5 | - | 0.17 | 8/7/2026 | |||||||||
| 8,000,000 | 3 | - | 0.54 | 1/11/2026 | |||||||||
Cynthia French | 20,000 | 1 | - | 1.98 | 8/15/2024 | ||||||||
| 870,550 | 2 | - | 0.17 | 8/7/2026 | |||||||||
| 150,000 | 4 | - | 0.33 | 2/9/2027 | |||||||||
| 1,000,000 | 3 | - | 0.54 | 1/11/2026 | |||||||||
1 | Options vested over four equal quarterly periods from August 31, 2017 to May 31, 2018. |
2 | Options vested over eight equal quarterly periods from September 1, 2019 to June 1, 2021. |
3 | Options vested over eight equal quarterly periods from March 31, 2021 to December 31, 2022. |
4 | Options vested 50% on grant date and the remaining 50% over four equal quarterly periods from May 9, 2020 to May 9, 2021. |
5 | Number of securities underlying exercisable options is net of 3.3 million share options gifted for no consideration by Mr. Parker in January 2021. |
Director Compensation
Since September 2018, the exhibit related thereto,Board compensation program has consisted exclusively of equity-based compensation, generally awarded annually, in the form of nonqualified stock options, RSUs, or a combination thereof. Unvested director equity compensation awards are forfeited if the director resigns or is furnished in responseremoved from the Board for cause prior to Item 2.02the vesting date. Nonqualified stock options generally expire five to seven years from grant date.
In July 2022, each of Form 8-Kour non-employee directors was awarded 250,000 nonqualified stock options and each of our audit committee members was awarded an additional 50,000 nonqualified stock options at an exercise price of $0.18 per share. These options vest over four equal quarterly increments commencing October 7, 2022 and expiring on July 7, 2029.
In October 2022, upon being appointed to the Board, Mr. Litvack was awarded 600,000 nonqualified stock options at an exercise price of $0.195 per share. These options vest over eight quarterly increments commencing January 27, 2023 and expiring October 27, 2027.
In January 2023, the Board formalized its non-employee director compensation program whereby (i) non-employee directors will continue to solely receive share-based compensation for board and committee service, (ii) share-based compensation will be awarded annually on or about the first month of each year, (iii) the grant-date fair value of non-employee director awards for annual board service shall not exceed $80,000 for board service plus $20,000 additional for serving on the audit committee, (iv) the awards shall vest over four equal quarters and expire no more than seven years after grant date, and (v) any unvested awards shall be deemed “filed”forfeited upon a director's termination of service for purposesany reason.
In connection with the non-employee director program, on January 16, 2023, each of Sectionour non-employee directors was awarded 250,000 nonqualified stock options and each of our audit committee members was awarded an additional 50,000 nonqualified stock options at an exercise price of $0.30 per share. These options vest over four equal quarterly increments commencing April 16, 2023, and expire on January 16, 2028.
In November 2023, following his appointment to the Board, Mr. Titterton was awarded 600,000 nonqualified stock options at an exercise price of $0.177 per share. These options vest over eight quarterly increments commencing February 18, 2024 and expiring November 18, 2028.
We reimburse our non-employee directors for their reasonable expenses incurred in attending meetings where applicable and we encourage participation in relevant educational programs for which we reimburse all or a portion of the Securities Exchange Act of 1934, nor shall it be deemed incorporated by reference in any disclosure document of the Registrant, except as shall be expressly set forth by specific reference in such document.costs incurred for these purposes.
PART IIIDirectors who are also our employees are not compensated for serving on our Board. Information regarding compensation otherwise received by our directors who are also named executive officers is provided under “Executive Compensation.”
Item 10. Dire
The information required by this item is incorporated by reference tofollowing table summarizes the compensation for each of our Definitive Proxy Statement to be filed with the Commission in connection with our 2018 Annual Meeting of Shareholders no later than 120 days after the endnon-employee directors who served as a director for any portion of the fiscal year covered by this report (our “2018 Proxy Statement”).ended December 31, 2023.
Name | Stock Awards($) | Option Awards($) 1 | Total ($) | |||||||||
(a) | (b) | (c) | (d) | |||||||||
Sanford Litvack 2 | $ | - | $ | 83,339 | $ | 83,339 | ||||||
Frank Newman 3 | - | 83,339 | 83,339 | |||||||||
Paul Rosenbaum 4 | - | 83,339 | 83,339 | |||||||||
Robert Sterne 5 | - | 69,450 | 69,450 | |||||||||
Lewis Titterton 6 | - | 97,513 | 97,513 | |||||||||
Item 11. Exec
1. | The amounts represented in columns (b) and (c) represent the full grant date fair value of share-based awards in accordance with ASC 718. Refer to Note 15 of the consolidated financial statements included in Item 8 for the assumptions made in the valuation of stock awards. |
2. | At December 31, 2023, Mr. Litvack has an aggregate of 900,000 nonqualified stock options outstanding, of which 525,000 are exercisable. |
3. | At December 31, 2023, Mr. Newman has an aggregate of 1,679,000 nonqualified stock options outstanding, all of which are exercisable. Mr. Newman forfeited 225,000 nonqualified stock options upon his resignation from the Board in 2023. |
4. | At December 31, 2023, Mr. Rosenbaum has 2,055,000 nonqualified stock options outstanding, of which 1,980,000 are exercisable. |
| 5. | At December 31, 2023, Mr. Sterne has 2,151,735 nonqualified stock options outstanding, of which 2,089,235 are exercisable. |
| 6. | At December 31, 2023, Mr. Titterton has 662,500 nonqualified stock options outstanding, of which 62,500 are exercisable. |
The information required by this item is incorporated by reference to our 2018 Proxy Statement.
Item 12. SecuritySecurity Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
Equity Compensation Plan Information
The following table gives information required by this item is incorporated by reference toas of December 31, 2023 about shares of our 2018 Proxy Statement. common stock authorized for issuance under all of our equity compensation plans (in thousands, except for per share amounts):
Plan Category | Number of securities to be issued upon exercise of outstanding options, warrants and rights | Weighted-average exercise price of outstanding options, warrants and rights | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) | ||||||||
(a) | (b) | (c) | |||||||||
Equity compensation plan approved by security holders (2011 Plan) | 1,104 | $0.83 | - | ||||||||
Equity compensation plans not approved by security holders 1,2 | 24,930 | 0.37 | 1,136 | ||||||||
Total | 26,034 | 1,136 | |||||||||
1. | Includes the 2019 Plan. Number of securities to be issued upon exercise of outstanding options, warrants and rights also includes Non-Plan awards. |
2. | The types of awards that may be issued under the 2019 Plan is discussed more fully in Note 15 to our consolidated financial statements included in Item 8. |
Security Ownership of Certain Beneficial Holders
The following table sets forth certain information as of March 15, 2024 with respect to the stock ownership of (i) those persons or groups who beneficially own more than 5% of our common stock, (ii) each of our directors, (iii) each of our executive officers, and (iv) all of our directors and executive officers as a group (based upon information furnished by those persons).
As of March 15, 2024, 88,295,803 shares of our common stock were issued and outstanding.
Name of Beneficial Owner | Amount and Nature of Beneficial Ownership | Percent of Class1 | ||||||
>5% HOLDERS (EXCLUDING EXECUTIVE OFFICERS AND DIRECTORS) | ||||||||
GEM Partners, LP | 9,174,999 | 2 | 9.99 | % | ||||
Thomas Staz Revocable Trust | 4,644,427 | 3 | 5.26 | % | ||||
EXECUTIVE OFFICERS AND DIRECTORS | ||||||||
Jeffrey Parker 11 | 11,190,583 | 4 | 11.31 | % | ||||
Cynthia French 11 | 2,232,133 | 5 | 2.47 | % | ||||
Sanford Litvack 11 | 1,094,932 | 6 | 1.23 | % | ||||
Paul Rosenbaum 11 | 3,900,386 | 7 | 4.26 | % | ||||
Robert Sterne 11 | 2,268,750 | 8 | 2.51 | % | ||||
Lewis Titterton 11 | 4,530,806 | 9 | 4.99 | % | ||||
All directors and executive officers as a group (6 persons) | 25,217,590 | 10 | 22.91 | % | ||||
1 | Percentage is calculated based on all outstanding shares of common stock plus, for each person or group, any shares of common stock that the person or the group has the right to acquire within 60 days pursuant to options, warrants, conversion privileges or other rights. Unless otherwise indicated, each person or group has sole voting and dispositive power over all such shares of common stock. |
2 | GEM Investment Advisors, LLC (“GEM Advisors”) is the general partner of GEM Partners LP (“GEM”) and Flat Rock Partners LP ("Flat Rock"). Mr. Daniel Lewis is the controlling person of GEM Advisors. GEM Advisors and Mr. Lewis have shared voting and dispositive power. Beneficial ownership includes (i) 6,600 shares held by Mr. Lewis, (ii) 24,100 shares held by Flat Rock, (iii) 5,627,375 shares held by GEM, and (iv) 3,516,924 shares underlying convertible notes held by GEM. Excludes 8,935,000 shares underlying convertible notes held by GEM that are not convertible within 60 days due to exercise limitations. The principal business address of GEM Advisors and Mr. Lewis is 100 State Street, Suite 2B, Teaneck, NJ 07666. Information derived from a Schedule 13G/A filed by GEM Advisors on February 28, 2024. |
3 | Thomas Staz is the trustee of the Thomas Staz Revocable Trust ("Staz Trust"). The principal business address of the Thomas Staz Revocable Trust is 1221 Brickell Avenue, Suite 2660, Miami, Florida 33131. Beneficial ownership excludes 750,000 shares underlying convertible notes held by the Staz Trust that are not convertible within 60 days due to exercise limitations. Information derived from a Schedule 13D filed by the Staz Trust on April 7, 2021. |
4 | Includes 10,680,000 shares of common stock issuable upon currently exercisable options, 393,324 shares held by Mr. Parker directly, and 117,259 shares held by Jeffrey Parker and Deborah Parker Joint Tenants in Common, over which Mr. Parker has shared voting and dispositive power. |
5 | Includes 2,040,550 shares of common stock issuable upon currently exercisable options. |
| 6 | Includes 818,750 shares of common stock issuable upon currently exercisable options and 192,308 shares of common stock issuable upon conversion of convertible notes. Excludes 356,250 shares of common stock issuable upon options that may become exercisable in the future. |
7 | Includes 2,123,750 shares of common stock issuable upon currently exercisable options and 1,169,231 shares of common stock issuable upon conversion of convertible notes. Excludes 206,250 shares of common stock issuable upon options that may become exercisable in the future. |
| 8 | Includes 2,220,485 shares of common stock issuable upon currently exercisable options and excludes 206,250 shares of common stock issuable upon options that may become exercisable in the future. |
9 | Includes 206,250 shares of common stock issuable upon currently exercisable options, 38,760 shares of common stock issuable upon exercisable warrants, and 2,293,077 shares of common stock issuable upon conversion of convertible notes. Excludes 731,250 shares of common stock issuable upon options that may become exercisable in the future and 380,000 shares underlying convertible notes held by Mr. Titterton that are not convertible within 60 days due to exercise limitations. |
10 | Includes 18,128,545 shares of common stock issuable upon currently exercisable options and warrants and 3,654,616 shares of common stock issuable upon conversion of convertible notes held by directors and officers and excludes 1,500,000 shares of common stock issuable upon options that may become exercisable in the future and 380,000 shares underlying convertible notes that are not convertible within 60 days due to exercise limitations (see notes 4, 5, 6, 7, 8 and 9 above). |
11 | The person’s address is 4446-1A Hendricks Avenue, Suite 354, Jacksonville, Florida 32207. |
Item 13. CertainCertain Relationships and Related Transactions and Director Independence.
Related Party Transactions
We paid approximately $52,000 and $7,000 in 2023 and 2022, respectively for patent-related legal services to SKGF, of which Robert Sterne is a partner. In addition, we paid approximately $163,000 and $115,000 in 2023 and 2022, respectively, for principal and interest on an unsecured note payable to SKGF. The note was issued in 2016 to convert outstanding unpaid legal fees to an unsecured promissory note. The note has been amended multiple times to defer principal payments. The note, as amended, allows for interest at 4% per annum, monthly installments of $12,500 per month beginning October 2022, with a final balloon payment due on April 30, 2027. At December 31, 2023, the outstanding balance of the note, including unpaid interest is approximately $474,000.
In May 2022, we sold an aggregate of $100,000 in promissory notes, convertible into shares of our common stock at a fixed conversion price of $0.13 to Paul Rosenbaum, one of our directors since December 2016. In September 2023, we repaid Mr. Rosenbaum $100,000 upon maturity of a convertible promissory note with a conversion price of $0.40 per share, and we sold Mr. Rosenbaum an additional $100,000 in promissory notes, convertible into shares of our common stock at an above-market fixed conversion price of $0.25. As of December 31, 2023, Mr. Rosenbaum holds $200,000 of our convertible promissory notes convertible into 1,169,231 shares of common stock. For the year ended December 31, 2023, we issued Mr. Rosenbaum an aggregate of 118,182 shares of our common stock, valued at $14,000, as payment of interest in kind on these convertible notes.
In January 2023, Sanford Litvack, one of our directors since October 2022, purchased 62,500 shares of our common stock at $0.16 per share in a private placement transaction. In August 2022, we sold an aggregate of $25,000 in promissory notes, convertible into shares of our common stock at a fixed conversion price of $0.13 to Mr. Litvack. For the year ended December 31, 2023, we issued Mr. Litvack an aggregate of 16,432 shares of our common stock, valued at $2,000, as payment of interest in kind on this convertible note.
In April 2023, we entered into a consulting services agreement with Lewis Titterton to provide short-term advisory services to our chief executive officer in connection with the restructuring of the Brickell funding agreements. As consideration for services under the agreement, we issued 250,000 unregistered shares of our common stock valued at approximately $30,000 and a one-time cash payment of $10,500. The consideration was recognized fully in the second quarter of 2023, prior to Mr. Titterton being appointed to the Board. Between 2018 and 2022, Mr. Titterton purchased an aggregate of $425,000 in promissory notes, convertible into shares of common stock at various prices. In September 2023, we repaid Mr. Titterton $100,000 upon maturity of a convertible promissory note with a conversion price of $0.40 per share. As of December 31, 2023, Mr. Titterton holds an aggregate of $325,000 in promissory notes, convertible into 2,673,077 shares of common stock. For the year ended December 31, 2023, we issued Mr. Titterton an aggregate of 266,142 shares of our common stock, valued at $32,000, as payment of interest in kind on these convertible notes.
Director Independence
We follow the rules of Nasdaq in determining if a director is independent. The Board also consults with our counsel to ensure that the Board’s determination is consistent with those rules and all relevant securities and other laws and regulations regarding the independence of directors. The Board has affirmatively determined that Messrs. Litvack, Titterton, Rosenbaum, and Sterne are independent directors.
Item 14. Principal Accountant Fees and Services.
The information required by this itemfirm of MSL, P.A. acts as our principal accountants. The following is incorporated by referencea summary of fees paid to our 2018 Proxy Statement.the principal accountants for services rendered.
Item 14. Principal Accountant FeesAudit Fees. For the years ended December 31, 2023 and Services.2022, the aggregate fees billed by our principal accountants for professional services rendered for the audit of our annual financial statements, the review of our financial statements included in our quarterly reports, and services provided in connection with regulatory filings were approximately $171,000 and $189,000, respectively.
The information requiredAudit Related Fees. For the years ended December 31, 2023 and 2022, there were no fees billed for professional services by this item is incorporated by reference to our 2018 Proxy Statement.principal accountants for assurance and related services.
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PART IVTax Fees. For the years ended December 31, 2023 and 2022, there were no fees billed for professional services rendered by our principal accountants for tax compliance, tax advice or tax planning.
All Other Fees. For the years ended December 31, 2023 and 2022, there were no fees billed for other professional services by our principal accountants.
All the services discussed above were approved by our audit committee. The audit committee pre-approves the services to be provided by our principal accountants, including the scope of the annual audit and non-audit services to be performed by the principal accountants and the principal accountants’ audit and non-audit fees.
Item 15. ExhibitsExhibits and Financial Statement Schedule.Schedules.
(a) Documents filed as part of this report:
(1) Financial statements:
Consolidated Balance Sheets as of December 31, 20172023 and 20162022
Consolidated Statements of Comprehensive LossIncome (Loss) for the years ended December 31, 20172023 and 20162022
Consolidated Statements of Shareholders’ (Deficit) EquityDeficit for the years ended December 31, 20172023 and 20162022
Consolidated Statements of Cash Flows for the years ended December 31, 20172023 and 20162022
Notes to Consolidated Financial Statements for the years ended December 31, 20172023 and 20162022
(2) Financial statement schedules:
Schedule II – Valuation and Qualifying Accounts for the years ended December 31, 2017 and 2016
Schedules other than those listed have been omitted since they are either not required, not applicable or the information is otherwise included.Not applicable.
(3) Exhibits.
Exhibit | ||
| Description | |
3.1 | ||
3.2 | ||
3.3 | ||
3.4 | ||
3.5 | ||
3.6 | ||
3.7 | ||
3.8 | ||
3.9 | ||
| 3.10 | Articles of Amendment to the Amended and Restated Articles of Incorporation (incorporated by reference from Exhibit 3.1 of Current Report on Form 8-K filed September 20, 2022) | |
3.11 | ||
4.1 |
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| 10.5 | Securities Purchase Agreement between Registrant and Accredited Investor Dated November 30, 2022 (incorporated by reference from Exhibit 10.1 of Current Report on Form 8-K filed | |
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101.INS | Inline XBRL Instance Document* | |
101.SCH | Inline XBRL Taxonomy Extension Schema* | |
101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase* |
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101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase* | |
101.LAB | Inline XBRL Taxonomy Extension Label Linkbase* | |
101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase* | |
| 104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) |
* Filed herewith
** Management contract or compensatory plan or arrangement.
ItemItem 16. Form 10-K Summary
None.
Pursuant to the requirements of Section 13 of the Exchange Act, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| Date: March 21, 2024 | |||
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PARKERVISION, INC. | |||
By: | /s/ Jeffrey L. Parker | ||
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Chief Executive Officer | |||
Pursuant to the requirements of the Exchange Act, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
Signature | Title | Date |
By: /s/ Jeffrey L. Parker | Chief Executive Officer and | March |
Jeffrey L. Parker | Chairman of the Board (Principal | |
Executive Officer) | ||
By: /s/ Cynthia L. | Chief Financial Officer (Principal | March |
Cynthia L. | Financial Officer and Principal | |
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