SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
x | QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended September 30, 2021March 31, 2022
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from ________to____________
Commission file number 000-22904
PARKERVISION, INC.
(Exact name of registrant as specified in its charter)
Florida | 59-2971472 | ||
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No) | ||
4446-1A Hendricks Avenue, Suite 354
Jacksonville, Florida 32207
(Address of principal executive offices)
(904) 732-6100
(Registrant’s telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class | Trading Symbol | Name of Each Exchange on Which Registered |
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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 of 1934 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 ¨ .
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such file). Yes x No ¨ .
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:
Large accelerated filer ¨ | Accelerated filer ¨ | |
Non-accelerated filer x | Smaller reporting company x | |
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 accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x
As of November 10, 2021, 75,189,175May 6, 2022, 77,935,740 shares of the issuer’s common stock, $.01 par value, were outstanding.
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION
ITEM 1. Financial Statements (Unaudited)
PARKERVISION, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(in thousands, except par value data)
September 30, | December 31, | March 31, | December 31, | |||||||
2021 | 2020 | 2022 | 2021 | |||||||
CURRENT ASSETS: | ||||||||||
Cash and cash equivalents | $ | 760 | $ | 1,627 | $ | 198 | $ | 1,030 | ||
Prepaid expenses | 707 | 599 | 463 | 574 | ||||||
Other current assets | 18 | 8 | 26 | 25 | ||||||
Total current assets | 1,485 | 2,234 | 687 | 1,629 | ||||||
Intangible assets, net | 1,696 | 1,785 | ||||||||
Operating lease right-of-use assets | 8 | 10 | 7 | 7 | ||||||
Intangible assets, net | 1,887 | 2,170 | ||||||||
Property, equipment and other assets, net | 21 | 42 | ||||||||
Other assets, net | 17 | 19 | ||||||||
Total assets | $ | 3,401 | $ | 4,456 | $ | 2,407 | $ | 3,440 | ||
CURRENT LIABILITIES: | ||||||||||
Accounts payable | $ | 589 | $ | 4,318 | $ | 944 | $ | 706 | ||
Accrued expenses: | ||||||||||
Salaries and wages | 58 | 19 | 43 | 27 | ||||||
Professional fees | 103 | 128 | 56 | 109 | ||||||
Statutory court costs | - | 251 | ||||||||
Other accrued expenses | 483 | 936 | 488 | 555 | ||||||
Related party note payable, current portion | 103 | 100 | 94 | 94 | ||||||
Secured note payable, current portion | - | 26 | ||||||||
Unsecured notes payable | - | 65 | ||||||||
Operating lease liabilities, current portion | 164 | 146 | 116 | 155 | ||||||
Total current liabilities | 1,500 | 5,989 | 1,741 | 1,646 | ||||||
LONG-TERM LIABILITIES: | ||||||||||
Secured contingent payment obligation | 35,940 | 33,057 | 36,212 | 37,372 | ||||||
Unsecured contingent payment obligations | 4,549 | 5,691 | ||||||||
Convertible notes | 3,015 | 3,018 | 2,870 | 2,895 | ||||||
Related party note payable, net of current portion | 633 | 703 | 585 | 609 | ||||||
Unsecured contingent payment obligations | 5,747 | 5,222 | ||||||||
Operating lease liabilities, net of current portion | 34 | 159 | 3 | 4 | ||||||
Other long-term liabilities | 1 | 129 | ||||||||
Total long-term liabilities | 45,370 | 42,288 | 44,219 | 46,571 | ||||||
Total liabilities | 46,870 | 48,277 | 45,960 | 48,217 | ||||||
SHAREHOLDERS' DEFICIT: | ||||||||||
Common stock, $0.01 par value, 150,000 and 140,000 shares authorized, 74,743 and 58,591 shares issued and outstanding at September 30, 2021 and December 31, 2020, respectively | 747 | 586 | ||||||||
Common stock, $0.01 par value, 150,000 shares authorized, 77,814 and 76,992 shares issued and outstanding at March 31, 2022 and December 31, 2021, respectively | 778 | 770 | ||||||||
Additional paid-in capital | 385,843 | 376,954 | 388,749 | 387,865 | ||||||
Accumulated deficit | (430,059) | (421,361) | (433,080) | (433,412) | ||||||
Total shareholders' deficit | (43,469) | (43,821) | (43,553) | (44,777) | ||||||
Total liabilities and shareholders' deficit | $ | 3,401 | $ | 4,456 | $ | 2,407 | $ | 3,440 | ||
PARKERVISION, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSSINCOME (LOSS)
(UNAUDITED)
(in thousands, except per share data)
Three Months Ended | Nine Months Ended | Three Months Ended | ||||||||||||||
September 30, | September 30, | March 31, | ||||||||||||||
2021 | 2020 | 2021 | 2020 | 2022 | 2021 | |||||||||||
Licensing revenue | $ | 144 | $ | - | $ | 144 | $ | - | $ | - | $ | - | ||||
Cost of sales | (1) | - | (1) | - | (3) | - | ||||||||||
Gross margin | 143 | - | 143 | - | (3) | - | ||||||||||
Selling, general and administrative expenses | 2,024 | 1,445 | 6,152 | 9,268 | 1,933 | 2,280 | ||||||||||
Total operating expenses | 2,024 | 1,445 | 6,152 | 9,268 | 1,933 | 2,280 | ||||||||||
Other income | 19 | 1 | 213 | 1 | 28 | - | ||||||||||
Interest expense | (70) | (119) | (185) | (420) | (62) | (37) | ||||||||||
Change in fair value of contingent payment obligations | (172) | (105) | (2,996) | (3,487) | 2,302 | (150) | ||||||||||
Total interest and other | (223) | (223) | (2,968) | (3,906) | ||||||||||||
Total other income (loss), net | 2,268 | (187) | ||||||||||||||
Net loss | (2,104) | (1,668) | (8,977) | (13,174) | ||||||||||||
Net income (loss) | 332 | (2,467) | ||||||||||||||
Other comprehensive loss, net of tax | - | - | - | - | ||||||||||||
Other comprehensive income, net of tax | - | - | ||||||||||||||
Comprehensive loss | $ | (2,104) | $ | (1,668) | $ | (8,977) | $ | (13,174) | ||||||||
Comprehensive income (loss) | $ | 332 | $ | (2,467) | ||||||||||||
Basic and diluted net loss per common share | $ | (0.03) | $ | (0.03) | $ | (0.13) | $ | (0.29) | ||||||||
Earnings (loss) per common share: | ||||||||||||||||
Basic | $ | 0.00 | $ | (0.04) | ||||||||||||
Diluted | $ | 0.00 | $ | (0.04) | ||||||||||||
Weighted average common shares outstanding | 73,868 | 50,530 | 69,869 | 44,772 | ||||||||||||
Weighted average common shares outstanding: | ||||||||||||||||
Basic | 77,553 | 63,695 | ||||||||||||||
Diluted | 106,859 | 63,695 | ||||||||||||||
PARKERVISION, INC.
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ DEFICIT
(UNAUDITED)
(in thousands)
Three Months Ended | Nine Months Ended | Three Months Ended | ||||||||||||||||
September 30, | September 30, | March 31, | ||||||||||||||||
2021 | 2020 | 2021 | 2020 | 2022 | 2021 | |||||||||||||
Total shareholders' deficit, beginning balances | $ | (42,949) | $ | (38,334) | $ | (43,821) | $ | (33,097) | $ | (44,777) | $ | (43,821) | ||||||
Common stock | ||||||||||||||||||
Beginning balances | 727 | 491 | 586 | 341 | 770 | 586 | ||||||||||||
Issuance of common stock and warrants in public and private offerings, net of issuance costs and initial fair value of contingent payment rights | - | 15 | 62 | 97 | - | 62 | ||||||||||||
Issuance of common stock upon exercise of options and warrants | 6 | 10 | 58 | 35 | 5 | 27 | ||||||||||||
Issuance of common stock and warrants for services | 2 | 1 | 9 | 7 | - | 6 | ||||||||||||
Issuance of common stock upon conversion and payment of interest-in-kind on convertible debt | 12 | 2 | 30 | 10 | 3 | 17 | ||||||||||||
Issuance of common stock upon conversion of short-term loans and payables | - | - | - | 22 | ||||||||||||||
Share-based compensation, net of shares withheld for taxes | - | 1 | 2 | 8 | - | 1 | ||||||||||||
Ending balances | 747 | 520 | 747 | 520 | 778 | 699 | ||||||||||||
Additional paid-in capital | ||||||||||||||||||
Beginning balances | 384,279 | 374,464 | 376,954 | 368,345 | 387,865 | 376,954 | ||||||||||||
Cumulative effect of change in accounting principle | - | - | (1,126) | - | - | (1,126) | ||||||||||||
Issuance of common stock and warrants in public and private offerings, net of issuance costs and initial fair value of contingent payment rights | - | 215 | 4,712 | 3,751 | (18) | 4,734 | ||||||||||||
Issuance of common stock upon exercise of options and warrants | 108 | 340 | 878 | 1,190 | 77 | 397 | ||||||||||||
Issuance of common stock and warrants for services | 208 | 25 | 829 | 257 | - | 391 | ||||||||||||
Issuance of convertible debt with beneficial conversion feature | - | - | - | 173 | ||||||||||||||
Issuance of common stock upon conversion and payment of interest-in-kind on convertible debt | 502 | 87 | 1,029 | 340 | 79 | 459 | ||||||||||||
Issuance of common stock upon conversion of short-term loans and payables | - | - | - | 318 | ||||||||||||||
Share-based compensation, net of shares withheld for taxes | 746 | 239 | 2,567 | 996 | 746 | 952 | ||||||||||||
Ending balances | 385,843 | 375,370 | 385,843 | 375,370 | 388,749 | 382,761 | ||||||||||||
Accumulated deficit | ||||||||||||||||||
Beginning balances | (427,955) | (413,289) | (421,361) | (401,783) | (433,412) | (421,361) | ||||||||||||
Cumulative effect of change in accounting principle | - | - | 279 | - | - | 279 | ||||||||||||
Comprehensive loss for the period | (2,104) | (1,668) | (8,977) | (13,174) | ||||||||||||||
Comprehensive income (loss) for the period | 332 | (2,467) | ||||||||||||||||
Ending balances | (430,059) | (414,957) | (430,059) | (414,957) | (433,080) | (423,549) | ||||||||||||
Total shareholders' deficit, ending balances | $ | (43,469) | $ | (39,067) | $ | (43,469) | $ | (39,067) | $ | (43,553) | $ | (40,089) | ||||||
PARKERVISION, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(in thousands)
Nine Months Ended | Three Months Ended | |||||||||
September 30, | March 31, | |||||||||
2021 | 2020 | 2022 | 2021 | |||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||||
Net loss | $ | (8,977) | $ | (13,174) | ||||||
Adjustments to reconcile net loss to net cash used in | ||||||||||
Net income (loss) | $ | 332 | $ | (2,467) | ||||||
Adjustments to reconcile net income (loss) to net cash used in operating activities: | ||||||||||
Depreciation and amortization | 281 | 497 | 83 | 97 | ||||||
Share-based compensation | 2,569 | 1,004 | 746 | 953 | ||||||
Noncash lease expense | 2 | 60 | ||||||||
Loss on changes in fair value of contingent payment obligations | 2,996 | 3,487 | ||||||||
Loss on disposal/impairment of equipment and intangible assets | 25 | 413 | ||||||||
Loan forgiveness | (194) | - | ||||||||
Noncash expense for amendment of equity-related agreements | - | 2,211 | ||||||||
(Gain) loss on changes in fair value of contingent payment obligations | (2,302) | 150 | ||||||||
Loss on disposal of assets | 8 | - | ||||||||
Changes in operating assets and liabilities: | ||||||||||
Prepaid expenses and other assets | 624 | 192 | 110 | 282 | ||||||
Accounts payable and accrued expenses | (4,139) | 1,302 | 191 | (3,970) | ||||||
Operating lease liabilities | (107) | (174) | (40) | (34) | ||||||
Total adjustments | 2,057 | 8,992 | (1,204) | (2,522) | ||||||
Net cash used in operating activities | (6,920) | (4,182) | (872) | (4,989) | ||||||
CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||||
Purchases of property and equipment | (2) | (3) | - | (1) | ||||||
Net cash used in investing activities | (2) | (3) | - | (1) | ||||||
CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||||
Net proceeds from issuance of common stock, including contingent payment rights, in private offerings | 5,186 | 3,057 | ||||||||
Net (payments) proceeds from issuance of common stock, contingent payment rights and warrants in public and private offerings | (18) | 5,208 | ||||||||
Net proceeds from exercise of options and warrants | 936 | 1,225 | 82 | 424 | ||||||
Net proceeds from debt financings | - | 1,244 | ||||||||
Principal payments on long-term debt | (67) | (1,251) | ||||||||
Principal payments on notes payable | (24) | (22) | ||||||||
Net cash provided by financing activities | 6,055 | 4,275 | 40 | 5,610 | ||||||
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS | (867) | 90 | (832) | 620 | ||||||
CASH AND CASH EQUIVALENTS, beginning of period | 1,627 | 57 | 1,030 | 1,627 | ||||||
CASH AND CASH EQUIVALENTS, end of period | $ | 760 | $ | 147 | $ | 198 | $ | 2,247 | ||
PARKERVISION, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. Description 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 technologies and products.
We have designed and developed proprietary radio frequency (“RF”) technologies and integrated circuits and license those 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 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 handsets, smart televisions and other WiFi products and, in certain cases, their chip suppliers for the infringement of a number of our RF patents. We have made significant investments in developing and protecting our technologies.
2. Liquidity and Going Concern
Our accompanying condensed consolidated financial statements were prepared assuming we would continue as a going concern, which contemplates that we will continue in operation for the foreseeable future and will be able to realize assets and settle liabilities and commitments in the normal course of business for a period of at least one year from the issuance date of these condensed consolidated financial statements. These condensed 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 from operations in every year since inception and have utilized the proceeds from the sales of debt and equity securities and contingent funding arrangements with third parties to fund our operations, including the cost of litigation. For the ninethree months ended September 30, 2021,March 31, 2022, we incurred arecognized net lossincome of approximately $9.0$0.3 million and incurred negative cash flows from operations of approximately $6.9$0.9 million. At September 30, 2021,March 31, 2022, we had cash and cash equivalents of approximately $0.8$0.2 million and an accumulated deficit of approximately $430.1$433.1 million. Additionally, a significant amount of future proceeds that we may receive from our patent enforcement and licensing programs will first be utilized to repay borrowings and legal fees and expenses under our contingent funding arrangements. 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 condensed consolidated financial statements.
For the nine months ended September 30, 2021,In May 2022, we received aggregate net proceeds of $0.3 million from debt and equity financingsthe sale of approximately $5.2 million andconvertible notes (see Note 14). Our current capital resources, including the proceeds from the exercise of outstanding options and warrants of approximately $0.9 million. We used a significant portion of these proceeds to pay current obligations resulting in a reduction in our accounts payable and accrued expenses of approximately $4.1 million for the nine months ended September 30, 2021. Our current capital resourcesMay 2022 transaction, are not sufficient to meet our short-term liquidity needs for the next twelve months and we will 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 use of our technologies by others in excess of our contingent payment obligations, (ii) our ability to control operating costs, and/or
(iii) our ability to obtain additional debt or equity financing, if needed.financing. We expect that proceeds received by us from patent enforcement actions and technology licenses over the next twelve months may not be sufficient to cover our working capital requirements.
We expect to continue to invest in the support of our patent enforcement and licensing programs. The long-term continuation of our business plan is dependent upon the generation of sufficient revenues from our technologies and/or products to offset expenses and contingent payment obligations. In the event that we do not generate sufficient revenues, 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 revenues, raise additional capital through debt or equity financings or contingent fee arrangements, and/or reduce operating costs will have a material adverse effect on our ability to meet our long-term liquidity needs and achieve our intended long-term business objectives.
3. Basis of Presentation
The accompanying unaudited condensed consolidated financial statements for the period ended September 30, 2021March 31, 2022 were prepared in accordance with generally accepted accounting principles (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Operating results for the three and nine months ended September 30, 2021,March 31, 2022, are not necessarily indicative of the results that may be expected for the year ending December 31, 2021,2022, or future years. All normal and recurring adjustments which, in the opinion of management, are necessary for a fair statement of the consolidated financial condition and results of operations have been included.
The year-end condensed consolidated balance sheet data was derived from audited financial statements for the year ended December 31, 2020.2021. Certain information and disclosures normally included in the notes to the annual financial statements prepared in accordance with GAAP have been omitted from these interim condensed consolidated financial statements. These interim condensed consolidated financial statements should be read in conjunction with our latest Annual Report on Form 10-K for the year ended December 31, 20202021 (“20202021 Annual Report”).
The condensed consolidated financial statements include the accounts of ParkerVision, Inc. and its wholly-owned German subsidiary, ParkerVision GmbH, after elimination of all intercompany transactions and accounts.
4. Accounting Policies
There have been no changes in accounting policies from those stated in our 20202021 Annual Report, other than as described below.Report. We do not expect any newly effective accounting standards to have a material impact on our financial position, results of operations or cash flows when they become effective.
We adopted Accounting Standards Update (“ASU”) 2020-06, “Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity” as of January 1, 2021. ASU 2020-06 simplifies accounting for convertible instruments, eliminating separation accounting for certain embedded conversion features. We used the modified retrospective method of adoption which allows for application of the guidance to transactions outstanding at the beginning of the fiscal year of adoption with the cumulative effect of the change being recorded as an adjustment to beginning retained earnings. Our adoption of ASU 2020-06 resulted in an increase to our long-term debt of approximately $0.8 million, a decrease in additional paid-in-capital of approximately $1.1 million, and an adjustment to our beginning accumulated deficit of
$0.3 million resulting from the elimination of the previously recognized beneficial conversion feature as a debt discount.
5. Revenue
We have an active monitoring and enforcement 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. We recognize such payments as
revenue in accordance with Accounting Standards Codification (“ASC”) 606, “Revenue from Contracts with Customers.”
DuringNaN revenue was recognized during the three and nine monthsthree-month periods ended September 30, 2021, we recognized approximately $0.14 million in revenue from licensing and settlement agreements with third parties for their use of our technologies. Our performance obligations were satisfied, and therefore revenue recognized, upon receipt of proceeds and subsequent dismissal of all patent enforcement actions between the parties.March 31, 2022 or 2021.
6. LossEarnings (Loss) per Common Share
Basic lossearnings (loss) per common share is determined based on the weighted-average number of common shares outstanding during each period. Diluted loss per common share is the same as basic loss per common share as all common share equivalents are excluded from the calculation, as their effect is anti-dilutive.
We haveThe 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 three months ended March 31, 2022 and 2021 (net income and shares in thousands):
March 31, | ||||||
2022 | 2021 | |||||
Numerator: | ||||||
Net income (loss) | $ | 332 | $ | (2,467) | ||
Effect of dilutive securities | 56 | - | ||||
Net income (loss) adjusted for dilutive effect | $ | 388 | $ | (2,467) | ||
Denominator: | ||||||
Weighted-average basic shares outstanding | 77,553 | 63,695 | ||||
Effect of dilutive securities | 29,306 | - | ||||
Weighted-average diluted shares | 106,859 | 63,695 | ||||
Basic earnings (loss) per share | $ | 0.00 | $ | (0.04) | ||
Diluted earnings (loss) per share | $ | 0.00 | $ | (0.04) | ||
Diluted earnings (loss) per common share for the three months ended March 31, 2022 excludes options and warrants that are anti-dilutive. For the three months ended March 31, 2021, all shares underlying outstanding options, warrants, unvested restricted stock units (“RSUs”) and convertible notes that were excluded from the computation of diluted loss per share as their effect would have been anti-dilutive. TheseThe anti-dilutive common share equivalents at September 30,March 31, 2022 and 2021 and 2020 were as follows (in thousands):
September 30, | March 31, | |||||||||
2021 | 2020 | 2022 | 2021 | |||||||
Options outstanding | 23,724 | 12,248 | 373 | 24,875 | ||||||
Warrants outstanding | 9,819 | 13,850 | 7,346 | 12,169 | ||||||
Unvested RSUs | - | 291 | - | 85 | ||||||
Shares underlying convertible notes | 20,757 | 23,807 | - | 21,957 | ||||||
54,300 | 50,196 | 7,719 | 59,086 | |||||||
7. Prepaid Expenses
Prepaid expenses consist of the following (in thousands):
September 30, | December 31, | March 31, | December 31, | |||||||||
2021 | 2020 | 2022 | 2021 | |||||||||
Prepaid services | $ | 640 | $ | 408 | $ | 400 | $ | 523 | ||||
Prepaid bonds for German statutory costs | - | 142 | ||||||||||
Prepaid insurance | 32 | 21 | 30 | 16 | ||||||||
Prepaid licenses, software tools and support | 19 | 11 | 23 | 23 | ||||||||
Other prepaid expenses | 16 | 17 | 10 | 12 | ||||||||
$ | 707 | $ | 599 | $ | 463 | $ | 574 | |||||
Prepaid services at September 30, 2021March 31, 2022 and December 31, 20202021 include approximately $0.6$0.4 million and $0.1$0.5 million, respectively of consulting services paid in shares of stock or warrants to purchase shares of stock in the future.
8. Intangible Assets
Intangible assets consist of the following (in thousands):
September 30, | December 31, | March 31, | December 31, | |||||||||
2021 | 2020 | 2022 | 2021 | |||||||||
Patents and copyrights | $ | 14,826 | $ | 14,948 | $ | 14,683 | $ | 14,755 | ||||
Accumulated amortization | (12,939) | (12,778) | (12,987) | (12,970) | ||||||||
$ | 1,887 | $ | 2,170 | $ | 1,696 | $ | 1,785 | |||||
9. Leases
During the nine months ended September 30, 2021, we entered into a sublease agreement related to our Lake Mary office space. The sublease is accounted for as an operating lease and is for the remaining term of our original lease, through November 2022. Rental income recognized of $0.02 million for the three and nine months ended September 30, 2021, is included in “Other income” in the accompanying condensed consolidated statements of comprehensive loss.
10. Debt
Notes Payable
Related Party Note Payable
We have an unsecured promissory note of approximately $0.7 million payable to Sterne, Kessler, Goldstein, & Fox, PLLC (“SKGF”), a related party, for outstanding unpaid fees for legal services. Subsequent to September 30, 2021, SKGF agreed to amend the note in order to extend the final balloon payment due under the note from April 2022 to April 2023. The SKGF note, as amended, will continue to accrueaccrues interest at a rate of 4% per annum requires repaymentsand provides for monthly payments of principal and interest at a rate of $10,000 per month and will extend thewith a final balloon payment intoof approximately $0.59 million due at the maturity date of April 30, 2023. We are currently in compliance with all the terms of the note.
Secured Note Payable
Our secured note payable as of December 31, 2020 represented default interest accrued related to a note payable to Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C (“Mintz”) for outstanding fees and expenses. Additionally, as of December 31, 2020, we had approximately $3.1 million in accounts payable to Mintz for outstanding fees and expenses. We also had approximately $3.6 million in disputed legal fees and expenses billed by Mintz that we treated as a loss contingency that was not probable as of December 31, 2020 and accordingly, for which we recognized no expense in the consolidated financial statements. On March 29, 2021, we entered into an agreement with Mintz to satisfy our outstanding obligations to Mintz. Under the terms of the agreement, (i) Mintz waived all past defaults on the note resulting in a reversal of previously accrued interest, (ii) we paid Mintz a lump-sum payment of $3.0 million in satisfaction of all outstanding obligations including our accounts payable to Mintz and all disputed and unrecorded billings, and (iii) Mintz agreed to a significant reduction in future success fees that might be payable to Mintz from patent-related proceeds.
Unsecured Notes Payable
Unsecured notes payable at December 31, 2020 represented a Paycheck Protection Program loan of approximately $0.2 million received in May 2020. The loan was eligible for forgiveness provided that (i) we used the loan proceeds exclusively for allowed costs including payroll, employee group health benefits, rent and utilities and (ii) employee and compensation levels were maintained during the coverage period. We applied for loan forgiveness in April 2021 and the loan was forgiven in June 2021. The forgiveness of the loan was recognized as income and is included in “Other income” in the accompanying condensed consolidated statements of comprehensive loss for the three and nine months ended September 30, 2021.
Convertible Notes
Our convertible notes represent 5-year promissory notes that are convertible, at the holders’ option, into shares of our common stock at fixed conversion prices. Interest payments are made on a quarterly basis and are payable, at our option, subject to certain equity conditions, in either cash, shares of our common stock, or a combination thereof. The number of shares issued for interest is determined by dividing the interest payment amount by the closing price of our common stock on the trading day immediately prior to the scheduled interest payment date. To date, all interest payments on the convertible notes have been made in shares of our common stock. We have recognized the convertible notes as debt in our condensed consolidated financial statements. The fixed conversion prices of certain of the notes were below the market value of our common stock on the closing date resulting in the recognition of a beneficial conversion feature that was recorded as a discount on the convertible notes at the note inception date, with a corresponding increase to additional paid in capital. Upon our adoption of ASU 2020-06 on January 1, 2021, the beneficial conversion feature was eliminated, resulting in an increase of $0.8 million to convertible debt and a cumulative adjustment to beginning accumulated deficit of $0.3 million, representing the discount amortization recognized prior to adoption of the new standard (see Note 4).
We have the option to prepay the majority of the notes, subject to a premium on the outstanding principal prepayment amount of 25% prior to the two-year anniversary of the note issuance date, 20% prior to the
three-year anniversary of the note issuance date, 15% prior to the four-year anniversary of the note issuance date, or 10% thereafter. The notes provide for events of default that include failure to pay principal or interest when due, breach of any of the representations, warranties, covenants or agreements made by us, events of liquidation or bankruptcy, and a change in control. In the event of default, the interest rate increases to 12% per annum and the outstanding principal balance of the notes plus all accrued interest due may be declared immediately payable by the holders of a majority of the then outstanding principal balance of the notes.
Convertible notes payable at September 30, 2021March 31, 2022 and December 31, 20202021 consist of the following (in thousands):
Fixed | Principal Outstanding as of | Fixed | Principal Outstanding as of | |||||||||||||||||||||
Conversion | Interest | September 30, | December 31, | Conversion | Interest | March 31, | December 31, | |||||||||||||||||
Description | Rate | Rate | Maturity Date | 2021 | 2020 | Rate | Rate | Maturity Date | 2022 | 2021 | ||||||||||||||
Convertible notes dated September 10, 2018 | $0.40 | 8.0% | September 7, 2023 | $ | 200 | $ | 600 | $0.40 | 8.0% | September 10, 2023 | $ | 200 | $ | 200 | ||||||||||
Convertible note dated September 19, 2018 | $0.57 | 8.0% | September 19, 2023 | 425 | 425 | $0.57 | 8.0% | September 19, 2023 | 425 | 425 | ||||||||||||||
Convertible notes dated February/March 2019 | $0.25 | 8.0% | February 28, 2024 to March 13, 2024 | 850 | 1,300 | $0.25 | 8.0% | February 28, 2024 to March 13, 2024 | 750 | 750 | ||||||||||||||
Convertible notes dated June/July 2019 | $0.10 | 8.0% | June 7, 2024 to July 15, 2024 | 340 | 340 | $0.10 | 8.0% | June 7, 2024 to July 15, 2024 | 295 | 320 | ||||||||||||||
Convertible notes dated July 18, 2019 | $0.08 | 7.5% | July 18, 2024 | 700 | 700 | $0.08 | 7.5% | July 18, 2024 | 700 | 700 | ||||||||||||||
Convertible notes dated September 13, 2019 | $0.10 | 8.0% | September 13, 2024 | 50 | 50 | $0.10 | 8.0% | September 13, 2024 | 50 | 50 | ||||||||||||||
Convertible notes dated January 8, 2020 | $0.13 | 8.0% | January 8, 2025 | 450 | 450 | $0.13 | 8.0% | January 8, 2025 1 | 450 | 450 | ||||||||||||||
Total principal balance | 3,015 | 3,865 | $ | 2,870 | $ | 2,895 | ||||||||||||||||||
Less Unamortized discount | - | 847 | ||||||||||||||||||||||
$ | 3,015 | $ | 3,018 | |||||||||||||||||||||
1The maturity date may be extended by one-year increments for up to an additional five years at the holders’ option at a reduced interest rate of 2%.
For the ninethree months ended September 30, 2021,March 31, 2022, convertible notes with a face value of $0.85$0.03 million were converted, at the option of the holders, into 2,800,000250,000 shares of our common stock and we recognized interest expense of approximately $0.2$0.06 million related to the contractual interest which we elected to pay in shares of our common stock. For the ninethree months ended September 30, 2021,March 31, 2022, we issued approximately 215,00092,000 shares of our common stock as interest-in-kind payments on our convertible notes.
At September 30, 2021,March 31, 2022, we estimate our convertible notes have an aggregate fair value of approximately $2.4$2.3 million and would be categorized within Level 2 of the fair value hierarchy.
Secured Contingent Payment Obligation
The following table provides a reconciliation of our secured contingent payment obligation, measured at estimated fair market value, for the ninethree months ended September 30, 2021March 31, 2022 and the year ended December 31, 20202021 (in thousands):
Nine Months Ended September 30, 2021 | Year Ended December 31, 2020 | Three Months Ended March 31, 2022 | Year Ended December 31, 2021 | |||||||||
Secured contingent payment obligation, beginning of period | $ | 33,057 | $ | 26,651 | $ | 37,372 | $ | 33,057 | ||||
Change in fair value | 2,883 | 6,406 | (1,160) | 4,315 | ||||||||
Secured contingent payment obligation, end of period | $ | 35,940 | $ | 33,057 | $ | 36,212 | $ | 37,372 | ||||
Our secured contingent payment obligation represents the estimated fair value of our repayment obligation to Brickell Key Investments, LP (“Brickell”) under a February 2016 funding agreement, as amended. Brickell is entitled to priority payments of 55%52% to 100% of proceeds received from all patent-related actions until such time that Brickell has been repaid its minimum return. The minimum return is determined as a multiple of the funded amount that increases over time. The estimated minimum return due to Brickell was approximately $47.2$50.5 million and $42.0$48.8 million as of September 30, 2021March 31, 2022 and
December 31, 2020,2021, respectively. 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 minimum return. The range of potential proceeds payable to Brickell is discussed more fully in Note 11.10. As of September 30, 2021,March 31, 2022, we are in compliance with our obligations under this agreement.
We have elected to measure our secured contingent payment obligation at its estimated fair value based on probability-weighted estimated cash outflows, discounted back to present value using a discount rate determined in accordance with accepted valuation methods (see Note 11)10). The secured contingent payment obligation is remeasured to fair value at each reporting period with changes recorded in the condensed consolidated statements of comprehensive lossincome (loss) until the contingency is resolved.
Unsecured Contingent Payment Obligations
The following table provides a reconciliation of our unsecured contingent payment obligations, measured at estimated fair market value, for the ninethree months ended September 30, 2021March 31, 2022 and the year ended December 31, 20202021 (in thousands):
Nine Months Ended September 30, 2021 | Year Ended | Three Months Ended | Year Ended | |||||||||
Unsecured contingent payment obligations, beginning of period | $ | 5,222 | $ | - | $ | 5,691 | $ | 5,222 | ||||
Reclassification of other liabilities | - | 1,003 | ||||||||||
Issuance of contingent payment rights | 412 | 2,258 | - | 412 | ||||||||
Change in fair value | 113 | 1,961 | (1,142) | 57 | ||||||||
Unsecured contingent payment obligations, end of period | $ | 5,747 | $ | 5,222 | $ | 4,549 | $ | 5,691 | ||||
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 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 lossincome (loss) until the contingency is resolved (see Note 11)10). During the nine months ended September 30, 2021, we received proceeds of $1.0million from the sale of common stock with CPRs, of which approximately $0.4 million was allocated to the CPRs. Our aggregate maximum obligation under the unsecured contingent payment obligations is $10.8 million as of September 30, 2021.
11.10. 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 September 30, 2021March 31, 2022 and December 31, 20202021 (in thousands):
Fair Value Measurements | Fair Value Measurements | |||||||||||||||||||||||
Total Fair Value | Quoted | Significant | Significant | Total Fair Value | Quoted | Significant | Significant | |||||||||||||||||
September 30, 2021: | ||||||||||||||||||||||||
March 31, 2022: | ||||||||||||||||||||||||
Liabilities: | ||||||||||||||||||||||||
Secured contingent payment obligation | $ | 35,940 | $ | - | $ | - | $ | 35,940 | $ | 36,212 | $ | - | $ | - | $ | 36,212 | ||||||||
Unsecured contingent payment obligations | 5,747 | - | - | 5,747 | 4,549 | - | - | 4,549 | ||||||||||||||||
Fair Value Measurements | Fair Value Measurements | |||||||||||||||||||||||
Total Fair Value | Quoted | Significant | Significant | Total Fair Value | Quoted | Significant | Significant | |||||||||||||||||
December 31, 2020: | ||||||||||||||||||||||||
December 31, 2021: | ||||||||||||||||||||||||
Liabilities: | ||||||||||||||||||||||||
Secured contingent payment obligation | $ | 33,057 | $ | - | $ | - | $ | 33,057 | $ | 37,372 | $ | - | $ | - | $ | 37,372 | ||||||||
Unsecured contingent payment obligations | $ | 5,222 | $ | - | $ | - | $ | 5,222 | 5,691 | - | - | 5,691 | ||||||||||||
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 of 14.41%16.36% at September 30, 2021,March 31, 2022, based on a risk-free rate of 0.41%2.36% 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 September 30, 2021,
March 31, 2022, 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 | Secured Contingent Payment Obligation | Unsecured Contingent Payment Obligations | |||||||||||||||||||||||||||||
Unobservable Inputs | Low | Weighted Average | High | Low | Weighted Average | High | Low | Weighted Average | High | Low | Weighted Average | High | ||||||||||||||||||||
Estimated undiscounted cash outflows (in millions) | $0.0 | $50.2 | $76.8 | $0.0 | $8.1 | $10.8 | $ | 0.0 | 59.4 | 88.4 | $0.0 | $7.5 | $10.8 | |||||||||||||||||||
Duration (in years) | 0.3 | 2.5 | 3.3 | 1.3 | 2.5 | 3.3 | 1.5 | 2.9 | 3.5 | 1.5 | 3.0 | 3.5 | ||||||||||||||||||||
Estimated probabilities | 0% | 21% | 25% | 25% | 25% | 25% | 5% | 17% | 35% | 5% | 18% | 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.
12.11. 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, including proceedings at the Patent Trial and Appeal Board of the U.S. Patent and Trademark Office (“PTAB”).
The majority of our litigation, 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 our third-party litigation funder.
We were liable for costs assessed on infringement and validity cases in Germany in which we did not prevail. A portion of this liability was covered by bonds posted in Germany. As of September 30, 2021, our bonds have been fully released and all outstanding statutory court costs have been satisfied in full. We have 0 remaining litigation or related liabilities in Germany.
ParkerVision v. Qualcomm (Middle District of Florida)Florida-Orlando Division)
We have filed a patent infringement complaint pendingnotice of appeal of a summary judgment decision issued in March 2022 by the Middle District of Florida in our patent infringement complaint against Qualcomm Incorporated and Qualcomm Atheros, Inc. (collectively “Qualcomm”) seeking approximately $1.3 billion in damages for. The patent infringement of 4 of our patents (the “Qualcomm Action”). HTC Corporation and HTC America, Inc. (collectively “HTC”) were also defendants in this case but we voluntarily dismissed our claims against HTC and HTC dismissed their related counter-claims against us in October 2020. Qualcomm has pending counterclaims against us for non-infringement and invalidity for all patents in the case. The case was filed in the Middle District of Florida in May 2014 and2014. The case was 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 March 2017, the PTAB ruled in our favor on 3 of the 6 petitions (the method claims), ruled in Qualcomm’s favor on 2 of the 6 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 4 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 judgementjudgment 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 7 of the 10 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. We are seekingIn October 2020, our damages expert submitted a report supporting our damages ask of $1.3 billion in royalties owed to us by Qualcomm for itsQualcomm’s unauthorized use of our technology, based on a report submitted by our damages expert in this case in October 2020.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 a jury and 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 approximately one month 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 haswas not yet been set althoughand the court indicated the case was unlikely to be tried before November or December 2021. Fact and expert discovery in this case are closed,has been completed, expert reports have been submitted, and summary judgementjudgment and Daubert briefings have been completedwere 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. We filedAs a motion to clarify the court’s order andresult of this ruling, in July 2021, based on the court’s response to our motion to clarify, we filed a joint motion for entry of a judgementjudgment of non-infringement of our Patent No. 7,865,177 (“the ‘177 Patent”), subject to appeal. A number
In January 2022, the court held a hearing to allow the parties to present their respective positions on three outstanding motions. The court indicated that upon its ruling on these motions, a pre-trial conference would be scheduled and a trial date set. On March 9, 2022, the court ruled with respect to one of outstandingthese motions granting Qualcomm’s motion to strike and exclude opinions regarding the alleged infringement and validity issues. This court order precluded the presentation of infringement and validity opinions by both of our experts at trial. On March 22, 2022, the court issued an order granting Qualcomm’s motion for summary judgment ruling that Qualcomm does not infringe the remaining three patents in this case. On April 20, 2022, we filed a notice of appeal to the United States Court of Appeals for the Federal Circuit. As a result of the court’s summary judgment motion in favor of Qualcomm, Qualcomm has the right 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 pending decisions by the court. represented in this case on a full contingency fee basis.
ParkerVision v. Apple and Qualcomm (Middle District of Florida)Florida-Jacksonville Division)
In December 2015, we filed a patent infringement complaint in the Middle 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 infringement of 4 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 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 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 3 of the 4 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 2 of the 6 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 the infringement case against Qualcomm Action.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 District of New Jersey against LG for the alleged infringement of the same four 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. Intel (Western District of Texas)
In February 2020, we filed a patent infringement complaint in the Western District of Texas against Intel Corporation (“Intel”) alleging infringement of 8 of our patents. The complaint was amended in May 2020 to add 2 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 was denied by the court. In July 2020 and September 2020, Intel filed petitions for Inter PartesReview (“IPR”) against two of the patents in this case and in January 2021, the PTAB instituted proceedings with regard to these two petitions (see Intel v. ParkerVision (PTAB) below).
The court issued its claim construction ruling in January 2021 in which the majority of the claims were decided in our favor. The case was scheduled for trial beginning February 7, 2022. In April 2021, we filed an amended complaint to include additional Intel chips and products, including Wi-FiWiFi devices, to the complaint. The court suggested that, given the number of patents at issue, the case would be separated into two trials and, as a result of the added products, the first trial date willwas scheduled for June 2022.
In January 2022, the PTAB issued its ruling on the IPRs (see Intel v. ParkerVision (PTAB) below). In February 2022, the parties filed a joint motion with respect to both Intel cases whereby the first case would be schedulednarrowed to 6 total patents asserted against Intel cellular products. These same six patents would be also asserted in Junethe second Intel case, along with one additional patent from the second case, against Intel WiFi and Bluetooth products. As a result of the restructuring of the two cases, the trial date was moved to October 2022. Based on discussions withIn March 2022, due to discovery delays, the court agreed to move the trial commencement date to December 5, 2022. Discovery is ongoing in this case. In March 2022, Intel filed a motion requesting further claim construction which we anticipate the second trial date will be scheduledhave opposed. The court has not yet ruled on this motion. In May 2022, we filed a motion to begin several months following the first trial.amend our complaint to add willful infringement based on information obtained during discovery. We are represented in this case on a full contingency fee basis.
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 1 patent that we voluntarily dismissed from the original case. In July 2020, we amended our complaint adding 2 more
patents to the case. Intel responded to the complaint denying infringement and claiming invalidity of the patents.
In MayJanuary 2021, we furtherIntel filed a petition for IPR against one of the patents in this case and in July 2021, the PTAB instituted proceedings with regard to this petition (see Intel v. ParkerVision (PTAB) below). We filed an amended our complaint in 2021 adding Intel WiFi and Bluetooth products to include additional Intel chips and products, including Wi-Fi devices.the case. Two claim construction hearings were held in June 2021 and in July 2021 and the court issued itscourt’s claim construction order in which the majority of the claim terms were construedruling was largely decided in our favor. BasedThe case was scheduled for trial in October 2022. In February 2022, the parties filed a joint motion which provided that the Intel II case would assert the same six patents from the first Intel case, provided none of the patents were invalidated in the first case, as well as one additional patent, depending on communications with the Courtoutcome of the pending IPR proceeding. , the parties submittedAs a case schedule setting forth a final pretrial conference for October 2022, however this date may change dependent upon the timingresult of the secondrestructuring of the cases, we anticipate the trial will be scheduled for this case in the Intel Ifall of 2023. We are represented in this case discussed above.on a full contingency fee basis.
Intel v. ParkerVision (PTAB)
Intel filed IPR petitions for Inter PartesReview (“IPR”) against U.S. patent 7,539,474 (“the ‘474 Patent”), and U.S. patent 7,110,444 (“the ‘444 Patent”) andwhich were both asserted in ParkerVision v. Intel. Intel also filed a petition for IPR against U.S. patent 8,190,108 (“the ‘108 Patent”), all of which are patentsis asserted in our infringement cases against Intel.ParkerVision v. Intel II. In January 2021, the PTAB issued its decision to institute IPR proceedings for the ‘444 Patent and the ‘474 Patent. An oral hearing was held on November 1, 2021 and final decisions from the PTAB on the ‘474 Patent and the ‘444 Patent are expected by latewere issued in January 2022. The PTAB ruled against us with respect to the single challenged claim of the ’444 Patent and ruled in our favor with respect to the seven challenged claims of the ‘474 Patent. The ‘444 Patent has subsequently been excluded from the narrowed claims asserted in ParkerVision v. Intel.
In July 2021, the PTAB issued its decision to institute IPR proceedings for the ‘108 Patent. We filed our response to this petition in October 2021 and an oral hearing is scheduled forwas held on April 26, 2022. A final decision from the PTAB with respect to the ‘108 Patent is expected by July 2022. Depending on the PTAB’s ruling with respect to the ‘108 Patent, we have the option to include or exclude this patent from the patents being asserted in the Intel II case.
Additional Patent Infringement Cases – Western District of Texas
ParkerVision filed a number of additional patent cases in the Western District of Texas in September and October 2020 including cases against (i) 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”), (ii) Hisense Co., Ltd. and Hisense Visual Technology Co., Ltd (collectively “Hisense”), a Chinese company, (iii) Buffalo Inc., a Japanese company (“Buffalo”) and (iv) Zyxel Communications Corporation, a Chinese multinational electronics company headquartered in Taiwan, (“Zyxel”). Each case alleges infringement of the same ten patents by products that incorporate modules containing certain Wi-FiWiFi chips manufactured by Realtek and/or MediaTek. Each of the defendants have filed responses denying infringement and claiming invalidity of the patents, among other defenses.
In September 2021, we dismissed the cases against Buffalo and Zyxel following satisfaction of the parties’ obligations under settlement and license agreements entered into in May 2021 and September 2021, respectively. The court held a Markman hearing on October 27, 2021 for the remaining defendants, Hisense and TCL, and issued its claim construction recommendations on October 29, 2021, in which nearly all of the claim terms were decided in our favor. The Hisense and TCL cases are expected to have a trial date in December 2022.
In May 2021, we also filed a patent infringement case against LG Electronics, a South Korean company, in the Western District of Texas alleging infringement of the same ten patents.
In September 2021, we dismissed the cases against Buffalo and Zyxel following satisfaction of the parties’ obligations under settlement and license agreements entered into in May 2021 and September 2021, respectively.
In May 2021, TCL and Hisense filed petitions for IPR against two of the ten patents asserted against them, including the ‘444 Patent which was challenged by Intel (see TCL, et. al. v. ParkerVision (PTAB) below). In December 2021, LGE filed nearly identical petitions for IPR against the same two patents along with a joinder motion requesting to join the existing petitions.
The court held a combined Markman hearing on October 27, 2021 for the cases against Hisense and TCL. The court issued its claim construction recommendations on October 29, 2021, in which nearly all of the claim terms were decided in our favor. The Hisense and TCL cases currently have a trial date scheduled for December 12, 2022. A claim construction hearing for the LGE case is scheduled for May 2022, with a trial scheduled to commence on April 24, 2023. We are represented in each of these cases on a full contingency fee basis.
TCL, et. al. v. ParkerVision (PTAB)
In May 2021, TCL, along with Hisense, filed petitions for Inter PartesReview (“IPR”)IPR against U.S. patent 7,292,835 (“the ‘835 Patent”) and the ‘444 Patent, both of which are asserted in the infringement cases against these parties in the Western District of Texas. An institution decision is expected fromIn November 2021, the PTAB issued its decision to implement IPR proceedings for these 2 patents. In December 2021, LGE filed nearly identical petitions against the same 2 patents along with a joinder motion requesting to join the existing petitions filed by TCL and Hisense. In April 2022, the PTAB granted LGE’s joinder motion. Oral hearings are scheduled for these IPRs in lateSeptember 2022 with a final decision expected in November 2021.2022.
13.12. Stock Authorization and Issuance
Stock Authorization
On September 28, 2021, our shareholders approved an amendment to our amended and restated articles of incorporation to increase our authorized common shares from 140 million to 150 million.
Stock and Warrant Issuances – Equity Based Financings
Private Placements with Accredited Investors
In January 2021, we entered into securities purchase agreements with accredited investors for the sale of an aggregate of 2,976,430 shares of our common stock at a price of $0.35 per share for aggregate proceeds of $1.0 million. The securities purchase agreements include CPRs. Approximately $0.4 million of the proceeds were allocated to unsecured contingent payment obligations based on the initial fair value estimate of the CPRs (see Note 10). The shares were registered for resale on a registration statement that was declared effective on April 26, 2021 (File No. 333-255217).
In March 2021, we entered into securities purchase agreements with accredited investors for the sale of 3,230,942 shares of our common stock and 1,619,289 warrants at a price of $1.29 per common share for aggregate proceeds of approximately $4.2 million. The warrants have an exercise price of $1.75 per share and expire in March 2026. The shares, including the shares underlying the warrants, were registered for resale on a registration statement that was declared effective on April 26, 2021 (File No. 333-255217).
We used $3.0 million of the proceeds from this transaction to satisfy our obligations to Mintz (see Note 10).
Stock Issuances – Payment for Services
In January 2021, we amended our business consulting and retention agreement with Chelsea Investor Relations to increase the compensation for services over the remaining term and to extend the term of the agreement through February 2024. As consideration for the amended agreement, we issued 500,000 shares of unregistered common stock in exchange for a nonrefundable retainer for services valued at approximately $0.33 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 26, 2021 (File No. 333-255217).
In January 2021, we also issued 50,000 shares of our unregistered common stock, valued at approximately $0.03 million, as compensation for three months of shareholder awareness services provided by a third party. In April 2021, we issued this third party an additional 50,000 shares of our unregistered common stock, valued at approximately $0.07 million as compensation for services over the remaining term of the agreement. In June 2021, we issued an additional 100,000 shares of our unregistered common stock, valued at approximately $0.12 million, to this same third-party as a retainer for services over a one-year term through May 31, 2022. The value of the shares issued will be recognized as consulting expense over the term of the agreement.
In April 2021, we issued 35,000 shares of our unregistered common stock to a consultant for services over a six-month term valued at approximately $0.04 million. The value of the shares issued will be recognized as consulting expense over the term of the agreement.
In addition, from time to time, we issue restricted stock awards under our approved equity plans to third party consultants as share-based compensation. See “Non-Employee Compensation” in Note 14.
Common Stock Warrants
As of September 30, 2021,March 31, 2022, we had outstanding warrants for the purchase of up to 9.810.3 million shares of our common stock. The estimated grant date fair value of these warrants of $2.8$3.2 million is included in additional paid-in capital in our condensed consolidated balance sheets. As of September 30, 2021,March 31, 2022, our outstanding warrants have an average exercise price of $0.73$0.75 per share and a weighted average remaining life of approximately 3.22.8 years.
14.13. 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 20202021 Annual Report.
For the three and nine months ended September 30,March 31, 2022 and 2021, we recognized share-based compensation expense of approximately $0.75 million and $2.57$0.95 million, respectively. Share-based compensation is included in selling, general and administrative expenses in the accompanying condensed, consolidated statements of comprehensive loss.income (loss).
As of September 30, 2021,March 31, 2022, there was $3.7$2.2 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 remaining life of approximately 1.250.75 years.
14. Subsequent Events
On May 10, 2022, we received proceeds of $0.3 million from the sale of convertible notes to accredited investors, including Paul Rosenbaum, one of our directors. The notes mature five years from the date of issuance and are convertible, at the holders’ option, into shares of our common stock at a fixed conversion
During the nine months ended September 30, 2021, our boardprice of directors (“Board”) amended our 2019 Long-Term Incentive Plan (“the 2019 Plan”)$0.13 per share. The notes bear interest at a stated rate of 8% per annum. Interest is payable quarterly, and we may elect, subject to increase the number ofcertain equity conditions, to pay interest in cash, shares of our common stock, reservedor a combination thereof. We also entered into a registration rights agreement with the investors pursuant to which we will register the shares underlying the notes. We have committed to file the registration statement by the 90th calendar day following the closing date and to cause the registration statement to become effective by the 120th calendar day following the closing date. The registration rights agreement provides for issuance underliquidated damages upon the 2019 Plan from 12 millionoccurrence of certain events, including failure by us to 27 million shares.file the registration statement or cause it to become effective by the deadlines set forth above. The Board also approved awards underamount of liquidated damages is 1.0% of the 2019 Planaggregate subscription upon the occurrence of 11.9 million nonqualified stock options to executivesthe event, and other key employees and an aggregate of 1.1 million nonqualified stock options to non-employee directors. The options are exercisable at $0.54 per share, vest in eight equal quarterly installments commencing March 31, 2021, and expire on January 11, 2026.
Non-Employee Compensation
On March 9, 2021, we granted approximately 32,000 shares under our 2019 Planmonthly thereafter, up to a consultant for business communications services over a 1-year term valued at approximately $0.05maximum of 6%, or $0.02 million. On August 10, 2021, we granted 150,000 shares under our 2019 Plan to a consultant for services over a 1-year term valued at approximately $0.2 million. The value of the shares issued will be recognized as consulting expense over the terms of the agreements.
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, 20202021 (the “2020“2021 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 of directors (“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 Quarterly 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 invented and developed proprietary radio frequency (“RF”) technologies and integrated circuits and license those technologies to third parties 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 handsets and providers of smart televisions and other WiFi products and, in certain cases, their chip suppliers, for the infringement of several 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 Events
Legal Proceedings
On March 9, 2022, the U.S. District Court in the Middle District of Florida granted a Qualcomm motion to strike and exclude opinions regarding alleged infringement and validity issues in ParkerVision v. Qualcomm. This court order precluded the presentation of infringement and validity opinions by both of our experts at trial. On March 22, 2022, the same court issued an order granting Qualcomm’s motion for summary judgment ruling that Qualcomm does not infringe the three patents in the case. On April 20, 2022, we filed a notice of appeal to the United States Court of Appeals for the Federal Circuit. As a result of the court’s summary judgment motion in favor of Qualcomm, Qualcomm has the right 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.
In May 2022, we filed a motion to amend our complaint in ParkerVision v. Intel to add willful infringement based on information obtained in discovery.
Sale of Convertible Notes
On May 10, 2022, we received proceeds of $0.3 million from the sale of five-year convertible notes to accredited investors, including Paul Rosenbaum, one of our directors. The notes bear interest at a stated rate of 8% per annum. Interest is payable quarterly, and we may elect, subject to certain equity conditions, to pay interest in cash, shares of our common stock, or a combination thereof. We also entered into a registration rights agreement with the investors pursuant to which we will register the shares underlying the notes.
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 sales of debt and equity securities and contingent funding arrangements with third-parties to fund our operations, including the cost of litigation.
For the ninethree months ended September 30, 2021,March 31, 2022, we incurred arecognized net lossincome of approximately $9.0$0.3 million and incurred negative cash flows from operations of approximately $6.9$0.9 million. At September 30, 2021,March 31, 2022, we had cash and cash equivalents of approximately $0.8$0.2 million and an accumulated deficit of approximately $430.1$433.1 million. Additionally, a significant amount of future proceeds that we may receive from our patent enforcement and licensing programs will first be utilized to repay borrowings and legal fees and expenses under our contingent funding arrangements. 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 our condensed consolidated financial statements.
We used cash for operations of approximately $6.9$0.9 million and $4.2$5.0 million for the ninethree months ended September 30,March 31, 2022 and 2021, and 2020, respectively. The increasedecrease in cash used for operations from 20202021 to 20212022 is primarily due to the use of approximately $4.1$4.0 million in cash for the reduction of accounts payables and accrued expenses during the ninethree months ended September 30,March 31, 2021, as compared to a $1.3$0.2 million increase in accounts payable and accrued expenses during the ninethree months ended September 30, 2020. This increase in use of cash is somewhat offset by a reduction in cash-based operating costs from 2020 to 2021.March 31, 2022. For the ninethree months ended September 30, 2021,March 31, 2022, we received aggregate net proceeds from the sale of debt and equity securities, including the exercise of outstanding options and warrants, of approximately $6.1$0.1 million compared to approximately $5.5$5.6 million in proceeds received for the ninethree months ended September 30, 2020.March 31, 2021. We repaid approximately $0.07$0.02 million and $1.3 million, respectively in debt obligations during each of the ninethree months ended September 30, 2021March 31, 2022 and 2020.2021.
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. All proceeds from litigation during the nine months ended September 30, 2021, were used to pay out-of-pocket legal expenses incurred by our counsel. Furthermore, we expect that revenue generated from patent enforcement actions and/or technology licenses in the remainder of 2021,2022, if any, after deduction of payment obligations to third-party litigation funders, legal counsel, and other investors, willmay not be sufficient to cover our operating expenses. Therefore, our
Our current capital resources, including $0.3 million in proceeds received from the sale of convertible notes in May 2022, are not sufficient to meet our short-term liquidity needs for the next twelve months and we will be required to seek additional capital.
Our ability to meet both our short-term and long-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 third-party litigation funders, legal counsel, and other investors; (ii) our ability to control operating costs, and (iii) our ability to raise additional capital from the sale of debt or equity securities or other financing arrangements. Failure to generate sufficient revenues, raise additional capital through debt or equity financings or contingent fee arrangements, and/or reduce operating costs will have a material adverse effect on our ability to meet our long-term liquidity needs and our ability to achieve our intended long-term business objectives.
Financial Condition
Our working capital increaseddecreased approximately $3.8$1.0 million from December 31, 20202021 to September 30, 2021.March 31, 2022. This increasedecrease in working capital is primarily the result of a $4.4 million decreasecash used in accounts payable and accrued expenses, somewhat offset by a $0.9 million decrease in cash on hand at September 30, 2021 when compared to Decemberoperations during the three months ended March 31, 2020. The decrease in accounts payable and accrued expenses included a $3.0 million payment to a law firm in settlement of outstanding fees and expenses and a reduction in potential success fees payable to the firm from future patent-related proceeds.2022.
Our long-term liabilities increaseddecreased approximately $3.1$2.4 million during the ninethree months ended September 30, 2021,March 31, 2022, primarily as a result of the $3.0$2.3 million increasedecrease in the estimated fair value of our secured and unsecured contingent payment obligations.
Results of Operations for Each of the Three and Nine Months Ended September 30,March 31, 2022 and 2021 and 2020
Revenue
Licensing revenue was $0.14 million for the three and nine months ended September 30, 2021. We reported no licensing revenue for the three or nine-monththree-month periods ended September 30, 2020. We entered into patent licensing and settlementMarch 31, 2022 or 2021. Cost of sales consists of amortization expense related to the patents covered under license agreements with Buffalo, Inc. (“Buffalo”) and Zyxel Communications Corporation (“Zyxel”) in May 2021 and September 2021, respectively. We recognized revenue from these contractsreached during the three monthsyear ended September 30, 2021 when the parties performance obligations were met. The revenue from these agreements was fully offset against out-of-pocket expenses, included in selling, general and administrative expenses, incurred under our contingent fee agreements and therefore did not impact our cash flows.December 31, 2021. Although we do anticipate additional revenue to result from our licensing agreements 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 litigation fees and expenses, personnel and related costs, including share-based compensation, for executive, Board, finance and accounting and technical support personnel for our patent enforcement program, and costs incurred for insurance and outside professional fees for accounting, legal and business consulting services.
Our selling, general and administrative expenses increaseddecreased by approximately $0.6$0.3 million, or 40%13%, during the three months ended September 30, 2021March 31, 2022 when compared to the same period in 2020.2021. This is primarily the result of a $0.5$0.2 million increasedecrease in share-based compensation for the comparable periods.periods and a $0.1 million decrease in litigation fees and expenses.
The increasedecrease in our share-based compensation for both the three and nine-month periodsthree-month period ended September 30, 2021March 31, 2022 is the result of share-based compensation expense attributed to restricted stock units and nonqualified stock options awarded to executives, key employees and nonemployee directors in January 20212019 and 2020 being fully recognized as more fully discussed in Note 14 to our condensed consolidated financial statements.of December 31, 2021. As of September 30, 2021,March 31, 2022, we
had $3.7$2.2 million of total unrecognized compensation cost related to all non-vested share-based compensation awards that is expected to be recognized over a period of approximately 1.250.75 years.
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 ninethree months ended September 30, 2021,March 31, 2022, we recorded an aggregate increasedecrease in the fair value of our secured and unsecured contingent payment obligations of approximately $3.0$2.3 million, compared to an increase of approximately $3.5$0.2 million for the ninethree months ended September 30, 2020.March 31, 2021. The change in fair value for the ninethree months ended September 30, 2020 includedMarch 31, 2022 was impacted by a $1.4sharp increase in the risk-free interest rate used in the calculation as a result of the Federal Reserve ending bond purchases and signaling it would implement multiple rate increases during 2022, resulting in a $1.8 million increasedecrease in the fair value of our secured and unsecured contingent payment obligations resulting fromobligations. The remaining decrease is a termination feeresult of changes in the estimated amounts and timing of projected future cash flows due to changes in probabilities and time frames based on a failed litigation funding arrangement incurredchanges in March 2020.the status of patent infringement actions.
Off-Balance Sheet Transactions, Arrangements and Other Relationships
As of September 30, 2021,March 31, 2022, we had outstanding warrants to purchase approximately 9.810.3 million shares of our common stock. The estimated grant date fair value of these warrants of approximately $2.8$3.2 million is included in shareholders’ deficit in our condensed consolidated balance sheets. The outstanding warrants have a weighted average exercise price of $0.73$0.75 per share and a weighted average remaining life of approximately 3.22.8 years.
Critical Accounting Policies
There have been no changes in accounting policies from those stated in our 20202021 Annual Report, except as described in Note 4 of the interim condensed consolidated financial statements.Report. We do not expect any newly effective accounting standards to have a material impact on our financial position, results of operations or cash flows when they become effective.
ITEM 3. Quantitative and Qualitative Disclosures About Market Risk.
Not applicable.
ITEM 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
As of September 30, 2021,March 31, 2022, our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our “disclosure controls and procedures,” as defined in Rule 13a-15(e) and 15d-15(e) under the Securities and Exchange Act of 1934, as amended (the “Exchange Act”). Based upon this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that these disclosure controls and procedures were effective as of September 30, 2021.March 31, 2022.
Changes in Internal Control Over Financial Reporting
There have been no changes in our internal control over financial reporting identified in connection with the evaluation required by Rule 13a-15(d) under the Exchange Act that occurred during the last fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II - OTHER INFORMATION
ITEM 1. Legal Proceedings.
Reference is made to the section entitled “Legal Proceedings” in Note 1211 to our unaudited condensed consolidated financial statements included in this quarterly report for a discussion of current legal proceedings, which discussion is incorporated herein by reference.
ITEM 1A. Risk Factors.
There have been no material changes from the risk factors disclosed in Item 1A of Part I of our Annual Report. In addition to the information in this quarterly report, the risk factors disclosed in our Annual Report 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.
ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds.
None.
ITEM 3. Defaults Upon Senior Securities.
None.
ITEM 4. Mine Safety Disclosures.
Not applicable.
ITEM 5. Other Information.
None.On May 10, 2022, we entered into a securities purchase agreement (the “Purchase Agreement”) with accredited investors (the “Holders”) which provides for the sale of unsecured convertible promissory notes (the “Notes”) with an aggregate face value of $300,000, including a Note with a face value of $100,000 sold to one of our directors, Paul Rosenbaum.
The Notes are convertible at any time and from time to time by the Holders into shares of our common stock at a fixed conversion price of $0.13 per share. Any unconverted, outstanding principal amount of the Notes is payable on May 10, 2027. The $300,000 proceeds from the sale of the Notes will be used to fund our operations.
Interest accrues at a rate of 8% per annum on the Notes, and is payable quarterly either in cash, shares of common stock, or a combination thereof at our option, subject to certain equity conditions, on the 15th of July, October, January, and April of each year during the term of the Notes, following the registration of the underlying securities.
The Notes provide for events of default that include (i) failure to pay principal or interest when due, (ii) any breach of any of the representations, warranties, covenants or agreements made by us in the Purchase Agreement, (iii) events of liquidation or bankruptcy, and (iv) a change in control. In the event of default, the interest rate increases to 12% per annum and the outstanding principal balance of the Notes plus all accrued interest due may be declared immediately payable by the holders of a majority of the outstanding principal balance of the Notes.
We also entered into a registration rights agreement (the “Registration Rights Agreement”) with the Holders pursuant to which we will register the shares of common stock underlying the Notes. We have committed to file the registration statement by the 90th calendar day following the issuance date of the Notes and to cause the registration statement to become effective by the 120th calendar day following the issuance date. The Registration Rights Agreement provides for liquidated damages upon the occurrence of certain events including failure by the Company 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 amount paid by the Holders for the Notes upon the occurrence of the event, and monthly thereafter, up to a maximum of 6%.
The Notes were offered and sold solely to accredited investors on a private placement basis under Section 4(a)2) of the Securities Act of 1933, as amended, and Rule 506 promulgated thereunder.
The foregoing summaries of the Notes, the Purchase Agreements, the Registration Rights Agreement and the list of accredited investors are qualified in their entirety by reference to the full text of the agreements, which are attached as part of Exhibits 10.1 through 10.4 hereto and are incorporated herein by reference.
On May 11, 2022, we issued a press release announcing our financial condition and results of operations for the three months ended March 31, 2022. The press release is attached hereto as Exhibit 99.1.
The foregoing information, including the exhibits related thereto, is furnished in response to Items 1.01, 2.02, and 3.02 of Form 8-K and shall not be deemed “filed” for purposes of Section 18 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.
ITEM 6. Exhibits.
Exhibit Number | Description of Exhibit | |
|
| |
10.2 | Form of | |
10.3 | Form of | |
10.4 | ||
31.1 | ||
31.2 | ||
32.1 | ||
99.1 | ||
101.INS | Inline XBRL Instance Document* | |
101.SCH | Inline XBRL Taxonomy Extension Schema* | |
101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase* | |
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 | Inline XBRL for the cover page of this Quarterly Report on Form 10-Q, included in the Exhibit 101 Inline XBRL Document Set |
*Filed herewith
** Furnished herewith
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
ParkerVision, Inc. | |||
Registrant | |||
| By: | /s/Jeffrey L. Parker | |
Jeffrey L. Parker | |||
Chairman and Chief Executive Officer | |||
(Principal Executive Officer) | |||
| By: | /s/Cynthia L. French | |
Cynthia L. French | |||
Chief Financial Officer | |||
(Principal Financial Officer and Principal | |||
Accounting Officer) | |||