PARKERVISION, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(UNAUDITED)

(in thousands, except per share data)









PARKERVISION, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

(in thousands)













6.  Prepaid Expenses



Prepaid expenses consist of the following (in thousands):



Prepaid services include approximately $0.3$0.2 million and $0.1 million of consulting services paid in shares of stock or warrants to purchase shares of stock in the future at March 31,June 30, 2020, and December 31, 2019, respectively.

7.  Intangible Assets



Intangible assets consist of the following (in thousands):





8. Long-term debtOperating Lease Right-of-Use Assets

For the six months ended June 30, 2020, we recognized an impairment loss of approximately $0.2 million on the right-of-use asset related to our Lake Mary office lease.  We ceased use of this facility in 2018 as part of our restructuring of operation.  The value of our right-of-use asset included estimated future sublease income.  Due to a number of factors, including the high vacancy rate of the building in which the space is located and the current COVID-19 environment, we determined securing a sublease for the space would be unlikely.  Accordingly, we recognized an impairment loss, which represented the remaining carrying value of the asset as of June 30, 2020.  The impairment is included in selling, general, and administrative expenses in our condensed consolidated statements of comprehensive loss.

9. Debt



Notes Payable



Related Party Note Payable to a Related Party

We have an unsecured promissory note payable of $0.9approximately $0.8 million payable to Sterne, Kessler, Goldstein, & Fox, PLLC (“SKGF”), a related party, for outstanding unpaid fees for legal services.  The SKGF note, as amended, accrues interest at a rate of 4% per annum, requires repayments of principal and interest at a rate of $10,000 per month with a final balloon payment due in April 2022.  We are currently in compliance with all the terms of the note, as amended.  

Unsecured Short-Term Notes Payable

In May and June 2019, we entered into unsecured short-term promissory notes with accredited investors for aggregate proceeds of approximately $0.23 million. The notes, as amended, accrued interest at a rate of 20% per annum.  During the three months ended March 31, 2020, we issued an aggregate of 1,740,426 shares of our common stock as an in-kind repayment of all outstanding principal and accrued interest on these short-term notes.



Secured Note Payable

We have a note payable to Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. (“Mintz”) for outstanding, unpaid attorney’s fees and costs associated with our patent enforcement program. The Mintz note is non-interest bearing, except in the event of a default, and is secured by certain of our U.S. and foreign patents. The note, at Mintz’s option, accelerates and becomes immediately due and payable in the case of standard events of default and/or in the event of a sale or other transfer of substantially all of our assets or a transfer of more than 50% of our capital stock in one or a series of transactions or through a merger or other similar transaction.



We have been in default on the payment terms of the note since November 17, 2019, and accordingly, have accrued interest at the default rate of 12% per annum.  Currently, Mintz has not requested acceleration of unpaid principal and interest on the note, nor have they waived the outstanding default. During the threesix months ended March 31,June 30, 2020, we made payments to Mintz of $1.2 million, which we applied to outstanding principal and interest on the Mintz note, leaving an outstanding balance, including accrued default interest, at March 31,June 30, 2020 of approximately $0.02 million.  Mintz disputes our application of payments against principal and interest on the note rather than against the $2.9$3.1 million in billed and unpaid fees and expenses payable to Mintz included in accounts payable at March 31,June 30, 2020.  The unpaid fees and expenses payable to Mintz at March 31,June 30, 2020 exclude approximately $3.6 million in fees billed by

Mintz that are in excess of agreed-upon fee caps.  We consider the excess fees to be a loss contingency that is not probable as of the issuance date of these condensed consolidated financial statements and, accordingly, we have not recognized these excess fees in expense for the three-month period ended March 31,June 30, 2020.   We are in active discussions with Mintz to resolve our outstanding fee dispute.dispute with regard to amounts billed and payable as well as any success fees payable on potential future proceeds.

Unsecured Notes Payable

Paycheck Protection Program Loan

In May 2020, we received approximately $0.2 million in proceeds from an approved loan under the Paycheck Protection Program.  Interest will accrue on outstanding principal balance at a rate of 1%, computed on a simple interest basis.  The loan principal and accrued interest will be eligible for forgiveness provided that (i) we use the loan proceeds exclusively for allowed costs including payroll, employee group health benefits, rent and utilities and (ii) employee and compensation levels are maintained.  If the loan is not forgiven, we will be required to make monthly repayments of approximately $8,000 per month commencing November 1, 2020 and the loan will mature on May 3, 2022, at which time any unpaid principal and accrued interest will be due and payable.  The current and noncurrent portions of this loan are included in the captions “Unsecured notes payable” and “Other long-term liabilities” in the condensed consolidated balance sheet as of June 30, 2020.



Convertible Notes



Our convertible notes represent five-year promissory notes that are convertible, at the holders’ option, into shares of our common stock at fixed conversion prices.  The notes bear interest at a stated rate of 8% per annum, except for the July 18, 2019 notes which bear interest at a stated rate of 7.5% per annum.  Interest is payable quarterly, and we may elect to pay interest in either cash, shares of our common stock, or a combination thereof, subject to certain equity conditions.  To date, all interest payments on the convertible notes have been made in shares of our common stock, including payments of $0.07$0.14 million during the threesix months ended March 31,June 30, 2020.



We have the option to prepay the majority of the notes any time following the one-year anniversary of the issuance of the notes, subject to a premium on the outstanding principal prepayment amount of 25% prior to the two-year anniversary of the note issuance date, 20% prior to the three-year anniversary of the note issuance date, 15% prior to the four-year anniversary of the note issuance date, or 10% thereafter.  We do not have a prepayment option with regard to the July 18, 2019 notes or the January 8, 2020 notes.

Notes with a principal balance of $0.13 million were converted, at the option of the holder, into shares of our common stock during the three monthssix month period ended March 31,June 30, 2020.

Convertible notes payable at March 31,June 30, 2020 and December 31, 2019 consist of the following (in thousands):





Secured Contingent Payment Obligation



The following table provides a reconciliation of our secured contingent payment obligation, measured at estimated fair market value, for the threesix months ended March 31,June 30, 2020 and the year ended December 31, 2019 (in thousands):







Our secured contingent payment obligation represents the estimated fair value of our repayment obligation to Brickell Key Investments, LP (“Brickell”) under a February 2016 funding agreement, as amended.    Brickell is entitled to priority payment of 55% to 100% of proceeds received from all patent-related actions until such time that Brickell has been repaid in full.  After repayment of the funded amount, which is $14.7 million as of March 31,June 30, 2020, Brickell 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, Brickell 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.  As of March 31,June 30, 2020, we are in compliance with our obligations under this agreement.



We have elected to measure our secured contingent payment obligation at 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 secured contingent payment obligation is remeasured to fair value at each reporting period with changes recorded in the condensed consolidated statements of comprehensive loss until the contingency is resolved (see Note 9)10).



Unsecured Contingent Payment ObligationObligations



The following table provides a reconciliation of our unsecured contingent payment obligation,obligations, measured at estimated fair market value, for the threesix months ended March 31,June 30, 2020 and the year ended December 31, 2019 (in thousands):







Our unsecured contingent payment obligation represents the estimated fair value of a termination feeobligations represent amounts payable to a third-party funderothers from future patent-related proceeds asincluding (i) a termination fee due to a litigation funder (“Termination Fee”) and (ii) contingent payment rights issued to accredited investors in connection with equity financings (“CPRs”). 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 condensed consolidated statements of comprehensive loss until the contingency is resolved (see Note 10).

The Termination Fee is a result of our failure to enter into a funding transaction by March 31, 2020.   We$1.0 million received aggregateas advances of $1.0 million under a letter agreement with a third-party funder, of which $0.6 million was advanced during the three-month period ended March 31, 2020.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 upfront payment received, or $5.0 million.  We did not reach an agreement as of March 31, 2020 and formally terminated negotiations in April 2020.  Accordingly, we will be required to pay the third-party funder a $5.0 million termination payment out of our future patent-related proceeds, if any.

We have elected to measure this unsecured contingent payment obligation at 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 obligation will be remeasured to fair value at each reporting period with changes recorded in the condensed consolidated statements of comprehensive loss until the contingency is resolved (see Note 9).

Advances under the letter agreement ofincluded $0.4 million as of December 31, 2019, and $0.6 million advanced in January 2020.  The advances, which were initially recorded in other long-term liabilities.  Atliabilities, were reclassified to unsecured contingent payment obligations at March 31, 2020 when the $0.4 million, along withTermination Fee obligation was incurred.  As of June 30, 2020, the additional $0.6 million in advances received in January 2020, were reclassified from other long-term liabilities to a long-termestimated fair value of unsecured contingent payment obligation.obligations related to the Termination Fee is $2.4 million.



9.The CPRs represent the estimated fair value of rights provided to accredited investors who purchased shares of our common stock between March and June 2020 (see Note 12).   During the six months ended June 30, 2020, we received proceeds of $1.5 million from the sale of common stock with contingent payment rights, of which $0.7 million was allocated to the CPRs.  In addition, on May 1, 2020, we granted CPRs to purchasers of $0.9 million of our common stock in March 2020, resulting in a charge to expense of $0.4 million for the initial estimated fair value of the CPRs.  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 $2.4 million.  As of June 30, 2020, the estimated fair value of unsecured contingent payment obligations related to the CPRs is $1.1 million.

10. Fair Value Measurements



The following tables summarize the fair value of our assets and liabilities measured at fair value on a recurring basis as of March 31,June 30, 2020 and December 31, 2019 (in thousands):











The fair values of both 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-

relatedpatent-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 of 14.29%14.18% at March 31,June 30, 2020, based on a risk-free rate of 0.29%0.18% as adjusted by 8% for credit risk and 6% for litigation inherent risk. 

The secured and unsecured contingent payment obligations do not have a fixed duration; however, our cash flow projections assume a remaining duration ranging from approximately one to three years with an average durationfollowing table provides quantitative information about the significant unobservable inputs used in the measurement of 2.3 years.  The cash outflows could potentially range from $0 to $58.8 million and $0 to $5.0 million through 2023 with a weighted average outflow of approximately $37.0 million and $3.3 millionfair value for both the secured and unsecured contingent payment obligations respectively.  at June 30, 2020, 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. 

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.

10.11.  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. We had 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. To the extent a loss is probable and reasonably estimable as of the balance sheet date, the estimated loss is recorded in the accompanying condensed consolidated statements of comprehensive loss and included in current liabilities under the heading “statutory court costs” in the condensed consolidated balance sheets. As of March 31,June 30, 2020, and December 31, 2019, we have accrued an aggregate of $0.36$0.33 million and $0.37 million, respectively, in estimated statutory court costs for our cases in Germany.



ParkerVision v. Qualcomm and HTC (Middle District of Florida)

We have a patent infringement complaint pending 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. The defendants have filed counterclaims against us for non-infringement and invalidity for all patents in the case. The case was filed in May 2014 and stayed in February 2016 pending decisions in other cases, including the appeal of a PTAB proceeding with regard to U.S. patent 6,091,940 (“the ‘940 Patent”) asserted in this case.  In September 2018, the Federal Circuit issued its 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 judgement in an attempt to exclude certain patents from the case, including the ‘940 Patent.  The court denied this motion in January 2020.  A claim construction hearing was held in this case in August 2015, prior to the stay, and a second claim construction hearing was held in November 2019.  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.  This case iswas scheduled for trial beginning December 1, 2020.  On2020; however, in March 16, 2020, in response to the impact of COVID-19, the parties filed a motion requesting a stay ofcourt stayed all deadlines and discovery responses for a period of four weeks, or until April 14, 2020.  On April 14,in the case.   In June 2020, the parties filedcourt lifted the temporary stay and issued a status report requestingnew scheduling order moving a continued staynumber of deadlines, including a change in the trial commencement date to May 3, 2021.  Discovery and depositions in this case through May 29, 2020.are currently underway.  The law firm of McKool Smith is representing us in this case on a contingency fee basis.



ParkerVision v. Apple and Qualcomm (Middle District of Florida)

In December 2015, we filed a 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 a corresponding case filed at the International Trade Commission (“ITC”). In July 2016, we entered into a patent license and settlement agreement with

Samsung and, as a result, Samsung was dismissed from the district court action. In March 2017, we filed a motion to terminate the ITC proceedings and a corresponding 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 the district court case (see ParkerVision v. LG below).  Also in July 2017, Qualcomm filed a motion to change venue to the southern 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 leaving our U.S. patent 9,118,528 as the only 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 scheduled 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 ParkerVision v. Qualcomm and HTC. 



ParkerVision v. LG (District of New Jersey)

In July 2017, we filed a patent infringement complaint in the district of New Jersey against LG for the alleged infringement of the same patents previously asserted against LG in the middle district of Florida (see ParkerVision v. Apple and Qualcomm above).  We elected to dismiss the case in the middle district of Florida and re-file in New Jersey as a result of a 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)

In June 2016, we filed a complaint in Munich District Court against LG Electronics Deutschland GmbH, a German subsidiary of LG Electronics, Inc. (“LGE”) seeking damages and injunctive relief for the alleged infringement of the German part of our European patent 1 206 831 (“the ‘831 Patent”). In November 2016, the court concluded that certain LGE products using Qualcomm RF circuitry infringe our patent.  The final decision in this case was stayed pending resolution of the corresponding nullity, or validity, action filed by Qualcomm in the German Federal Patent Court in Munich (see Qualcomm v. ParkerVision below).  In October 2018, we received an unfavorable decision in the nullity case.  As a result, our infringement complaint in this case was dismissed, anddismissed.  As the non-prevailing party, we are subject to a claimclaims for reimbursement of statutory attorney’s fees and costs in this case which are accrued in the accompanying condensed consolidated financial statements as of March 31,June 30, 2020 and December 31, 2019.  We have posted a bond to cover this cost which is included in “Prepaid expenses” in the accompanying condensed consolidated balance sheets. In April 2020, the court fixed the amounts due for statutory attorney’s fees and costs, and we have requested a release of the bond funds which will fully cover this cost. 



Qualcomm v. ParkerVision – Federal Patent Court in Germany (as appealed to the German Supreme Court)

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 LGE and Apple as discussed above. On October 17, 2018, following an oral hearing, the court ruled that the ‘831 Patent was invalid.    In January 2019, we appealed this decision to the German Supreme Court, but withdrew our appeal in July 2019.  WeAs the non-prevailing party, we are subject to claims for reimbursement of statutory fees and costs in this case, which are accrued in the accompanying condensed consolidated financial statements as of March 31,June 30, 2020 and December 31, 2019.  

ParkerVision v. Apple (Munich, Germany) – the Apple II case

The Apple II case sought damages and injunctive relief for the alleged infringement of the German part of our European patent 1 135 853 (“the ‘853 Patent”).  The court ruled in April 2019 that Apple does not infringe our ‘853 Patent. We did not appeal this decision. As a result,the non-prevailing party, we are subject to a claimclaims for reimbursement of statutory attorney’s fees and costs in this case which we have accrued in the accompanying condensed consolidated financial statements as of March 31,June 30, 2020 and December 31, 2019. We have posted a bond to cover this cost which is included in “Prepaid expenses” in the accompanying condensed consolidated balance sheets.



Intel v. ParkerVision (Federal Patent Court in Germany)

In August 2017, Intel filed a nullity action in German Federal Patent Court claiming invalidity of the ‘853 Patent that is the subject of the Apple II case.  In December 2019, following the adverse decision in the Apple II case, we elected not to proceed with a defense in this case.  In December 2019,As the Federal Patent Court determined thatnon-prevailing party, we will bear the costsare subject to claims for reimbursement of statutory attorney fees and costs in this case as the non-prevailing party.  Accordingly,which we have accrued a contingent loss of statutory fees and costs in the accompanying condensed consolidated financial statements as of March 31,June 30, 2020 and December 31, 2019.



ParkerVision v. Intel (Western District of Texas)

In February 2020, we filed a patent infringement complaint in the Western District of Texas against Intel alleging infringement of eight of our patents. The complaint was amended in May 2020 to add two additional patents. In June 2020, we requested that one of the patents be dropped from this case and filed a second case in the Western District of Texas that included this dismissed patent (see ParkerVision v. Intel II below).  Intel’s response to our complaint was filed in June 2020 denying infringement and claiming invalidity of the patents.  Intel has also filed a motion to transfer venue which has not yet been ruled on by the court.  The Markman, or claim construction hearing, is currently scheduled for January 22, 2021 and the case is scheduled for trial beginning February 7, 2022.    The law firm of Goldberg Segalla is representing us in this case on a contingency fee basis.  



11.ParkerVision v. Intel II (Western District of Texas)

In June 2020, to reduce the number of claims in ParkerVision v. Intel,  we filed a second patent infringement complaint in the Western District of Texas against Intel that included a single patent that was dismissed from the original case.   In July 2020, we amended our complaint adding two more patents to the case.  No dates have yet been set in this case.    The law firm of Goldberg Segalla is representing us in this case on a contingency fee basis.

ParkerVision v. TCL Technology Group Corp (Central District of California)

In May 2020, we filed a patent infringement complaint against Technology Group Corp, a Chinese company, and its U.S. subsidiary, TTE Technology, Inc. (collectively “TCL”) in the Central District of California alleging infringement of nine of our patents. TCL products included in the action incorporate modules that contain certain Wi-Fi chips manufactured by Realtek Semiconductor Corporation, a Taiwanese IC provider. TCL’s response to our complaint is due October 9, 2020.  The law firm of Goldberg Segalla is representing us in this case on a contingency fee basis.

12. Stock Issuance



Stock and Warrant Issuances – Equity Based Financings





Private Placements with Accredited Investors

In January 2020, we entered into securities purchase agreements with accredited investors for an aggregate of 1,169,232 shares of our common stock at a price of $0.13 per share and 166,667 shares of our common stock at $0.15 per share for aggregate proceeds of approximately $0.2 million. In March

2020, we entered into securities purchase agreements with accredited investors for an aggregate of 2,571,432 shares of our common stock at a price of $0.35 per share for aggregate proceeds of $0.9 million.  The shares were registered for resale on a registration statement that was declared effective on April 28, 2020 (File No. 333-237762). 

The securities purchase agreements for the March 2020 transaction were amended on May 1, 2020,  in order to add a contingent payment right whereby we will pay each investor an allocated portion of our share of proceeds from patent-related actions, after taking into account fees and expenses payable to law firms representing the Company and amounts payable to Brickell, up to an amount equal to the investors’ aggregate subscription amount, or $0.9 million.  This amendment resulted in the recognition of $0.4 million in expense to recognize the initial fair value of the contingent payment right (see “unsecured contingent payment obligations” in Note 9). 

During the three months ended June 30, 2020, we entered into securities purchase agreements with accredited investors for an aggregate of 4,365,296 shares of our common stock at a price of $0.35 per share for aggregate proceeds of $1.5 million. The securities purchase agreements include contingent payment rights.  Approximately $0.7 million of the proceeds were allocated to unsecured contingent payment obligations based on the initial fair value estimate of the CPRs (see Note 13)9).  We entered into registration rights agreements with the investors pursuant to which we will register the shares.  We have committed to file the registration statement by August 21, 2020 and to cause the registration statement to become effective by the 150th calendar day following the closing date. The registration rights agreements provide for liquidated damages upon the occurrence of certain events including failure by us to file the registration statement or cause it to become effective by the deadlines set forth above. The amount of the liquidated damages is 1.0% of the aggregate subscription upon the occurrence of the event, and monthly thereafter, up to a maximum of 6%, or approximately $0.1 million.



Warrant Amendment with Aspire Capital

On February 28, 2020, we entered into a warrant amendment agreement (the “Warrant Amendment Agreement”) with Aspire Capital Fund, LLC (“Aspire”), with respect to warrants issued in July and

September 2018 (the “2018 Warrants”) that are exercisable, collectively, into 5,000,000 shares of our common stock.   The Warrant Amendment Agreement provided for a reduction in the exercise price for the 2018 Warrants from $0.74 to $0.35 per share and the issuance of a new warrant for the purchase of 5,000,000 shares of our common stock at an exercise price of $0.74 per share (“New Aspire Warrant”).   The New Aspire Warrant expires February 28, 2025 and is subject to adjustment in the event of certain stock dividends and distributions, stock splits, stock combinations, reclassifications or similar events affecting our common stock and also upon any distributions of assets to our stockholders.  The New Aspire Warrant contains provisions that prohibit exercise if the holder, together with its affiliates, would beneficially own in excess of 9.99% of the number of shares of common stock outstanding immediately after giving effect to such exercise. The holder of the New Aspire Warrant may increase (up to 19.99%) or decrease this percentage by providing at least 61 days’ prior notice to the Company. In the event of certain corporate transactions, the holder of the New Aspire Warrant will be entitled to receive, upon exercise of such New Aspire Warrant, the kind and amount of securities, cash or other property that the holder would have received had they exercised the New Aspire Warrant immediately prior to such transaction. The New Aspire Warrant does not contain voting rights or any of the other rights or privileges as a holder of our common stock.



The Warrant Amendment Agreement added a call provision to the 2018 Warrants whereby we may, after December 31, 2020, call for cancellation of all or any portion of the 2018 Warrants for which an exercise notice has not yet been received, in exchange for consideration equal to $0.001 per warrant share and subject to certain conditions, including the continued existence of an effective registration statement for the underlying shares of common stock and the availability of sufficient authorized shares to allow for the

exercise of the 2018 Warrants.  All other terms of the 2018 Warrants remained unchanged, including the original expiration dates of July and September 2023.  In connection with the Warrant Amendment Agreement, Aspire exercised 1,430,000 shares of the 2018 Warrants for aggregate proceeds to us of $0.5 million.  An additional 1,070,000 shares of the 2018 Warrants were exercised during the three months ended June 30, 2020 for aggregate proceeds to us of $0.38 million.  We recognized $1.78 million of non-cash warrant expense in connection with the Warrant Amendment Agreement based on the difference between the Black-Scholes value of the warrants immediately before and after the amendment.  The shares underlying the New Aspire Warrant were registered for resale on a registration statement that was declared effective on April 28, 2020 (File No. 333-237762).  The shares underlying the 2018 Warrants are currently registered for resale pursuant to a registration statement on Form S-1 (File No. 333-226738). 



Stock and Warrant Issuances – Payment for Services



Chelsea Investor Relations

On February 10, 2020, we entered into a business consulting and retention agreement with Chelsea Investor Relations (“Chelsea”) to provide business advisory services to us.  As consideration for services to be provided under the 24-month term of the consulting agreement, we issued 500,000 shares of unregistered common stock in exchange for a nonrefundable retainer for services valued at approximately $0.15 million.  The value of the stock issued is being recognized as consulting expense over the term of the agreement. The shares were registered for resale on a registration statement that was declared effective on April 28, 2020 (File No. 333-237762).



Tailwinds

On March 16, 2020, we entered into an agreement with Tailwinds Research Group LLC (“Tailwinds”) to provide digital marketing services to us.  As consideration for services to be provided under the twelve-month term of the agreement, we issued warrants for the purchase up to 200,000 shares of our common stock with an exercise price of $1.00 per share in exchange for a nonrefundable retainer for services, valued using the Black-Scholes method, at approximately $0.06 million.  The value of the warrants is being recognized to expense over the term of the agreement.  The Tailwinds warrants are exercisable immediately after issuance, expire March 16, 2023, and are subject to adjustment in the event of certain

stock dividends and distributions, stock splits, stock combinations, reclassifications or similar events affecting our common stock.  The shares underlying the warrant were registered for resale on a registration statement that was declared effective on April 28, 2020 (File No. 333-237762). 



On June 8, 2020, we entered into an agreement with a third party to provide media advisory services.  As consideration for services to be provided under the term of the agreement, which extends through December 31, 2020, we issued 30,000 shares of unregistered common stock for a nonrefundable retainer for services valued at approximately $0.01 million.  The value of the stock issued is being recognized as a consulting expense over the term of the agreement.  We are not obligated to register the shares for resale.

Common Stock Warrants

As of March 31,June 30, 2020, we had outstanding warrants for the purchase of up to 15.914.9 million shares of our common stock.  The estimated grant date fair value of these warrants of $2.7$2.3 million is included in Additional Paid-in Capital in our condensed consolidated balance sheets.  As of March 31,June 30, 2020, our outstanding warrants have an average exercise price of $0.43 per share and a weighted average remaining life of approximately 3.4 years.

12.

13. Share-Based Compensation



There has been no material change in the assumptions used to compute the fair value of our equity awards, nor in the method used to account for share-based compensation from those stated in our 2019 Annual Report. 



The following table presents share-based compensation expense included in our condensed consolidated statements of comprehensive loss for the three months ended March 31,June 30,  2020 and 2019, respectively (in thousands):



As of March 31,June 30, 2020, there was $1.1$0.8 million of total unrecognized compensation cost related to all non-vested share-based compensation awards.  The cost is expected to be recognized over a weighted-average period of approximately 1 year.



On January 14, 2020, the Board granted nonqualified stock options to purchase 218,000 shares at an exercise price of $0.21 and 171,000 restricted shares awards (“RSAs”) to former directors in settlement of approximately $0.3 million in past Board and committee compensation fees.  The options and RSAs vest immediately upon grant and the options expire five years from the grant date.



On February 9, 2020, the Board approved an aggregate of equity awards under the Company’s 2019 Long Term Incentive Plan (the “2019 Plan”) to executives and other key employees. The awards included 675,000 restricted share units (“RSUs”) and 150,000 nonqualified stock options at an exercise price of $0.33 per share.  Fifty percent (50%)  of the RSUs vest on May 9, 2020 and the remaining RSUs vest in four equal quarterly installments commencing August 9, 2020.  The options vest 50% upon grant with the remainder vesting in four equal quarterly installments commencing May 10, 2020.



In addition, on February 9, 2020, the Board approved equity awards to independent directors under the 2019 Plan for the directors’ continued waiver of all cash fees for board or committee service.  The awards included 150,000 RSUs and 300,000 nonqualified stock options at an exercise price of $0.33 per share. The non-employee director awards vest 50% upon grant with the remaining portion vesting in four equal quarterly installments commencing May 9, 2020.  The Board also awarded an immediately vested option to purchase 100,000 shares at an exercise price of $0.33 per share under the Company’s 2011 Long Term Incentive Equity Plan to Robert Sterne in exchange for Mr. Sterne’s waiver of approximately $0.1 million in accrued and unpaid fees for board and committee service from 2016 to 2018.  Each of the options awarded expire on February 9, 2027.



13.  Subsequent EventsNon-Employee Compensation

On April 29,June 7, 2020, we sold an aggregateextended our 2019 business consulting and retention agreement with Mark Fisher to provide business advisory services to us through 2020.  As consideration for services to be provided under the 12-month term of 1,428,577the consulting agreement, we issued a restricted stock award (RSA) of 20,000 shares of our common stock through the 2019 Long Term Incentive Plan in exchange for a nonrefundable retainer for services valued at a price of $0.35 per share for aggregate proceeds of $0.5 million in a private placement transaction with accredited investors.approximately $0.01 million.  The purchase agreements also provide the investors with a contingent payment right whereby we will pay each investor an allocated portion of our share of proceeds from patent-related actions, after taking into account fees and expenses payable to law firms representing the Company and amounts payable to Brickell, up to an aggregate of $0.5 million.  

We entered into registration rights agreements with the investors pursuant to which we will register the shares.  We have committed to file the registration statement by the 60th calendar day following the closing date and to cause the registration statement to become effective by the 150th calendar day following the closing date. The registration rights agreements provide for liquidated damages upon the occurrence of certain events including failure by us to file the registration statement or cause it to become effective by the deadlines set forth above. The amountvalue of the liquidated damages is 1.0%shares issued was recognized as share-based compensation at the time of the aggregate subscription upon the occurrence of the event, and monthly thereafter, up to a maximum of 6%.issuance.  

In addition, on May 1, 2020, we amended the securities purchase agreements for the March 2020 transaction in order to add a contingent payment right whereby we will pay each investor an allocated portion of our share of proceeds from patent-related actions, after taking into account fees and expenses payable to law firms representing the Company and amounts payable to Brickell, up to an aggregate of $0.9 million.  

In May 2020, we received approximately $0.2 million in proceeds from an approved loan under the Paychecks Protection Program.  Interest will accrue on outstanding principal balance at a rate of 1%, computed on a simple interest basis.  The loan principal and accrued interest will be eligible for forgiveness provided that (i) we use the loan proceeds exclusively for allowed costs including payroll, employee group health benefits, rent and utilities and (ii) employee and compensation levels are maintained.  If the loan is not forgiven, we will be required to make monthly repayments of approximately $8,000 per month commencing November 1, 2020 and the loan will mature on May 3, 2022, at which time any unpaid principal and accrued interest will be due and payable.

In May 2020, we filed a patent infringement complaint in U.S. district court in the Central District of California against Technology Group Corp, a Chinese company, and its U.S. subsidiary, TTE Technology, Inc. (collectively “TCL”) alleging infringement of nine of our patents. TCL products included in the action incorporate modules that contain certain Wi-Fi chips manufactured by Realtek Semiconductor Corporation, a Taiwanese IC provider. The law firm of Goldberg Segalla is representing us in this case on a contingency fee basis.  

ITEM 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations



Forward-Looking Statements



We believe that it is important to communicate our future expectations to our shareholders and to the public.  This quarterly report contains forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995, including, in particular, statements about our future plans, objectives, and expectations contained in this Item.  When used in this quarterly report and in future filings by us with the Securities and Exchange Commission (“SEC”), the words or phrases “expects”, “will likely result”, “will continue”, “is anticipated”, “estimated” or similar expressions are intended to identify “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 identified in our annual report on Form 10-K for the fiscal year ended December 31, 2019 (the “2019 Annual Report”) and in this Item 2 of Part I of this quarterly report.  Examples of such risks and uncertainties include general economic and business conditions, competition, unexpected changes in technologies and technological advances, the timely development and commercial acceptance of new products and technologies, reliance on key suppliers, reliance on our intellectual property, the outcome of our intellectual property litigation and the ability to obtain adequate financing in the future.  We have no obligation to publicly release the results of any revisions which may be made to any forward-looking statements to reflect anticipated events or circumstances occurring after the date of such statements.



Corporate Website



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://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, Board 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.



Overview



We have designed and developed 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 business plan is the enforcement of our intellectual property rights through patent infringement litigation and licensing efforts. We currently have patent enforcement actions ongoing in various U.S. district courts against providers of mobile handset providershandsets and smart televisions and, in certain cases, their chip suppliers for the infringement of a numberseveral of our RF patents.  We have made significant investments in developing and protecting our technologies, the returns on which are dependent upon the generation of future revenues for realization.



Recent Developments



Impact of COVID-19

Many states, including Florida, have been under a stay-at-home order since mid-March 2020 in an effort to contain the spread of COVID-19.  While our employees currently have the ability and are encouraged to work remotely, school closures and other stay-at-home measures have an impact on employee productivity and attendance.attendance and limit our ability to successfully sublease office space that is not in use.  In addition, we have experienced delays in certain deadlines in our patent infringement litigation as a result of court closures, travel bans and stay-at-home measures in Florida as well as other states in which we have ongoing litigation and states in which the defendants to our patent infringement actions have personnel and facilities.  In addition, the current economic environment as a result of COVID-19 makes access to debt and equity capital more challenging.  

In May 2020, we received approximately $0.2 million in proceeds from an approved loan under the PaychecksPaycheck Protection Program.  Interest will accrue on outstanding principal balance at a rate of 1%, computed on a simple interest basis.  The loan principal and accrued interest will be eligible for forgiveness provided that (i) we use the loan proceeds exclusively for allowed costs including payroll, employee group health benefits, rent and utilities and (ii) employee and compensation levels are maintained.  We believe we will be eligible for forgiveness of all, or a substantial portion of, the loan.  If the loan is not forgiven, we will be required to make monthly repayments of approximately $8,000 per month commencing November 1, 2020 and the loan will mature on May 3, 2022, at which time any unpaid principal and accrued interest will be due and payable.

Legal Proceedings

In April 2020, the district court in the Middle District of Florida (Orlando division) issued its claim construction order in Parkervision v. Qualcomm and HTC whereby the court adopted the majority of our proposed claim construction language for the disputed terms.   ThisIn June 2020, the court currently has alifted the temporary stay in place for all scheduleddue to COVID-19 and discovery and deadlinesis underway.  The trial date in responsethe case has been moved from December 2020 to COVID-19.  The stay is expected to last at least through May 29, 2020.2021 as a result of the COVID-19 delays. 



In addition, in April 2020, the district court in the Middle District of Florida (Jacksonville division) ruled to stay the ParkerVision v. Qualcomm and Apple action, in response to a joint motion filed by us and Apple requesting a stay of this action pending the resolution of the case in the Orlando division against Qualcomm and HTC. This case had originally been scheduled for trial commencing in August 2020 but was under an administrative stay due to the impact of COVID-19.



In May 2020, we amendedfiled two separate complaints against Intel in the Western District of Texas alleging infringement of an aggregate of 12 of our complaint in ParkerVision v. Intel in Texas to add two patents to the case that was originally filed in February 2020.patents.  We also filed an action against Chinese TCL Technology Group Corp and its U.S. subsidiary TTE Technology, Inc. (collectively “TCL”) in U.S. district court in the Central District of California alleging infringement of nine of our patents.  TCL products included in the action incorporate modules that contain certain Wi-Fi chips manufactured by Realtek Semiconductor Corporation, a Taiwanese IC provider.  The law firm of Goldberg Segalla is representing us on a contingency fee basis in both the Intel and TCL cases.



Equity FinancingSale of Stock with Contingent Payment Rights

From April to June 2020, we received an aggregate of $1.5 million from the sale of equity securities with contingent payment rights.  In April 2020,July, we received aggregate net proceeds of $0.5$0.2 million from the saleadditional sales of equity securities with contingent payment rights.  The contingent payment rights entitle the investors to an allocated portion of our share of proceeds from patent-related actions, after taking into account fees and expenses payable to law firms representing us and amounts payable to Brickell, up to an aggregate of $0.5 million.  Additionally, on May 1, 2020, we entered into an amendment to certain March 2020 securities purchase agreements to add a contingent payment right for the investors, up to an aggregate of $0.9 million.Brickell.   



Liquidity and Capital Resources



We have incurred significant losses from operations and negative operating cash flows in every year since inception, largely as a result of our significant investments in developing and protecting our intellectual property, and have utilized the proceeds from the sales of ourdebt and equity securities and contingent funding arrangements with third-parties to fund our operations, including the cost of litigation. 



We used cash for operations of approximately $1.3 million and $1.7 million for the three months ended March 31, 2020 and 2019, respectively.  At March 31,June 30, 2020, we had cash and cash equivalents of $0.2$0.5 million, a working capital deficit of approximately $5.4$4.6 million, and an accumulated deficit of approximately $409.7$413.3 million.  These circumstances raise substantial doubt about our ability to continue to operate as a going concern within one year following the issue date of our condensed consolidated financial statements.



We used cash for operations of approximately $3.0 million and $2.6 million for the six months ended June 30, 2020 and 2019, respectively.  The increase in cash used for operations from 2019 to 2020 is primarily due to increases in payments of out-of-pocket expenses for ongoing litigation that were not covered under existing contingent fee arrangements.  For the threesix months ended March 31,June 30, 2020, we received aggregate net proceeds from the sale of debt and equity securities, of approximately $1.5 million, proceeds fromincluding the exercise of outstanding warrants, of approximately $0.5$4.7 million compared to approximately $1.9 million in proceeds received for the six months ended June 30, 2019.  We repaid approximately $1.2 million and advances from a potential litigation funding party of approximately $0.6 million.$0.8 million, respectively in debt obligations during the six months ended June 30, 2020 and 2019.  In addition, we repaid approximately $0.7 million in short-term debt and other accrued expenses throughwith the use of shares of our common stock.stock during the six months ended June 30, 2020.  Despite theseour recent funding efforts, our resources are not sufficient to meet our short-term liquidity needs and we will be required to seek additional capital.



In July 2020, we received aggregate proceeds from the sale of equity securities and unsecured contingent payment rights of approximately $0.2 million.  In addition, we are exploring additional financing opportunities for both our short and long-term capital needs.  These financing opportunities may include debt, convertible debt, common or preferred equity offerings, or a combination thereof.  There can be no assurance that we will be able to consummate a financing transaction or that the terms of such financing will be on terms and conditions that are acceptable.  



At June 30, 2020, we had approximately $0.2 million in debt obligations to be paid within twelve months, a decrease of $1.3 million in current debt obligations at December 31, 2019.  The decrease in our short-term debt repayment obligations is primarily the result of $1.2 million in repayments under secured and unsecured promissory notes and $0.2 million in repayments of short-term notes with shares of our common stock, somewhat offset by approximately $0.1 million increase in short-term repayment obligations from our Paycheck Protection Program loan received in 2020.

Our ability to meet our short-term liquidity needs, including our debt repayment obligations, is dependent upon (i) 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 Brickell, legal counsel, and other investors; and (ii) our ability to raise additional capital from the sale of debt or equity securities or other financing arrangements.    

Patent enforcement litigation is costly and time-consuming and the outcome is difficult to predict.   We expect to continue to invest in the support of our patent enforcement and licensing programs.  We expect that revenue generated from patent enforcement actions and/or technology licenses in 2020, if any, after deduction of payment obligations to Brickell, legal counsel, and other investors, may not be sufficient to cover our operating expenses.  In the event we do not generate revenues, or other patent-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 equity securities or other financing arrangements.