As filed with the Securities and Exchange Commission on April 15, 201921, 2020
Registration No. 333-_______
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
__________
FORM S-1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
__________
PARKERVISION, INC.
(Exact name of registrant as specified in its charter)
__________
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Florida | 3663 | 59-2971472 |
(State or Other Jurisdiction of Incorporation) | (Primary Standard Industrial Classification Code Number) | (IRS Employer Identification No.) |
7915 Baymeadows Way,9446 Philips Highway, Suite 4005A
Jacksonville, Florida 32256
Phone: (904) 732-6100
(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)
__________
Jeffrey Parker, Chairman of the Board
ParkerVision, Inc.
7915 Baymeadows Way,9446 Philips Highway, Suite 4005A
Jacksonville, Florida 32256
(904) 732-6100
(Name, address and telephone number, including area code, of agent for service)
__________
with a copy to:
David Alan Miller, Esq.
Graubard Miller
The Chrysler Building
405 Lexington Avenue - 11th floor
New York, NY 10174-1901
__________
Approximate date of commencement of proposed sale to the public: As soon as possible after the Registration Statement is declared effective.
If any of the securities being registered on this Form are to be offered on a delayed or continued basis pursuant to Rule 415 under the Securities Act of 1933 check the following box: ☒
If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
If this form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration number of the earlier effective registration statement for the same offering. ☐
If this form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration number of the earlier effective registration statement for the same offering. ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a 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.
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Large accelerated filer ☐ |
| Accelerated filer ☐ |
Non-accelerated filer ☒ |
| Smaller reporting company ☒ |
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| Emerging growth company ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act. ☐
CALCULATION OF REGISTRATION FEE
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| Title of Securities to be Registered |
| Amount to be Registered (4)(5) |
| Proposed Maximum Offering Price Per Share (6) |
| Proposed Maximum Aggregate Offering Price |
| Amount of Registration Fee |
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| Common Stock, par value $0.01 per share |
| 5,200,000 | (1) |
| $0.20 |
| $1,040,000 |
| $ | 126.05 |
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| Common Stock, par value $0.01 per share |
| 2,600,000 | (2) |
| $0.20 |
| $520,000 |
| $ | 63.02 |
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| Common Stock, par value $0.01 per share underlying Warrant |
| 5,000,000 | (3) |
| $0.20 |
| $1,000,000 |
| $ | 121.20 |
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| Total |
| 12,800,000 |
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| $2,560,000 |
| $ | 310.27 |
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Title of Securities to be Registered |
| Amount to be Registered (9) |
| Proposed Maximum Offering Price Per Share (10) |
| Proposed Maximum Aggregate Offering Price |
| Amount of Registration Fee |
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Common Stock, par value $0.01 per share |
| 500,000 | (1) |
| $0.32 |
| $ 160,000 |
| $ 20.77 |
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Common Stock, par value $0.01 per share |
| 3,461,538 | (2) |
| $0.32 |
| $ 1,107,692 |
| $ 143.78 |
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Common Stock, par value $0.01 per share |
| 1,000,000 | (3) |
| $0.32 |
| $ 320,000 |
| $ 41.54 |
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Common Stock, par value $0.01 per share |
| 1,335,899 | (4) |
| $0.32 |
| $ 427,488 |
| $ 55.49 |
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Common Stock, par value $0.01 per share |
| 2,571,432 | (5) |
| $0.32 |
| $ 822,858 |
| $ 106.81 |
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Common Stock, par value $0.01 per share |
| 2,740,426 | (6) |
| $0.32 |
| $ 876,936 |
| $ 113.83 |
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Common Stock, par value $0.01 per share |
| 5,000,000 | (7) |
| $0.32 |
| $ 1,600,000 |
| $ 207.68 |
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Common Stock, par value $0.01 per share |
| 200,000 | (8) |
| $0.32 |
| $ 64,000 |
| $ 8.31 |
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Total |
| 16,809,295 |
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| $ 5,378,974 |
| $ 698.21 |
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(1) | Represents shares of common stock, par value $0.01 per share (“Common Stock”) issuable pursuant to a convertible promissory |
(2) | Represents shares of Common Stock issuable pursuant to convertible promissory notes dated January 8, 2020 at a fixed conversion price of $0.13 per share (the “January 2020 Notes”). |
(3) | Represents shares of Common Stock that are issuable pursuant to any elections made by us to pay interest in shares of Common Stock on the September 2019 Note and the January 2020 Notes (collectively, the “Notes”), and assumes that each interest payment made through maturity will be paid in shares of Common Stock. The interest is payable at a rate of 8% of the outstanding principal balance per annum and interest payments will be made quarterly beginning on the earlier of (i) ninety (90) days following the issue date of the |
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(4) | Represents shares of Common Stock issued pursuant to securities purchase agreements dated January 9, 2020 and January 15, 2020 with the selling stockholders named herein. |
(5) | Represents shares of Common Stock issued pursuant to securities purchase agreements dated March 5, 2020 and March 13, 2020 with the selling stockholders named herein. |
(6) | Represents shares of Common Stock issued as payment for services and as payment of principal and interest in satisfaction of short-term loans and other amounts payable to the selling stock holders named herein. |
(7) | Represents shares of Common Stock issuable pursuant to a warrant agreement with Aspire Capital Fund, LLC (“Aspire”). |
(8) | Represents shares of Common Stock issuable pursuant to a warrant agreement with Tailwinds Research Group LLC (“Tailwinds”). |
(9) | Pursuant to Rule 416(a) of the Securities Act of 1933, as amended (the “Securities Act”), this Registration Statement also covers any additional shares of Common Stock which may become issuable to prevent dilution from stock splits, stock dividends and similar events. |
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| Pursuant to Rule 457(c) of the Securities Act, this amount represents the |
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The registrant hereby amends this Registration Statement on Form S-1 on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the registration statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.
Pursuant to Rule 429 promulgated under the Securities Act, the prospectus forming a part of this Registration Statement on Form S-1 also relates to the registrant’s Registration Statement on Form S-3 which was declared effective on August 2, 2016 (File No. 333-212670) (the “Resale Registration Statement”), the registrant’s Registration Statement on Form S-1 and pre-effective amendment thereto, which was declared effective on September 10, 2018 (File No. 333-226738) (the “Aspire Resale Registration Statement”) and the registrant’s Registration Statement on Form S-1 which was declared effective on November 13, 2018 (File No. 333-228184) (the “Conversion Share Resale Registration Statement”). This Registration Statement, as amended, constitutes Post-Effective Amendment No. 1 to Form S-3 on Form S-1 to the Resale Registration Statement, Post-Effective Amendment No. 1 to Form S-1 to the Aspire Resale Registration Statement, and Post-Effective Amendment No. 1 to Form S-1 to the Conversion Share Resale Registration Statement. Such Post-Effective Amendments shall become effective concurrently with this Registration Statement on such date as the Securities and Exchange Commission, acting pursuant to Section 8(c) of the Securities Act, may determine.
EXPLANATORY NOTE
This Registration Statement contains two forms of prospectus: (a) one to be used in connection with the resale by the selling stockholders named in this prospectus of up to 12,800,000 shares of common stock consisting of (i) 7,800,000 shares of common stock issuable upon conversion of, and the payment of interest from time to time for, convertible promissory notes issued between February 28, 2019 through March 13, 2019 (the “2019 Notes”) and (ii) 5,000,000 shares of common stock issuable upon the exercise of a warrant issued on December 20, 2018 (the “Resale Prospectus”); and (b) one to be used in connection with (i) the resale by the selling stockholders named in this prospectus of 923,540 shares of common stock and 350,000 shares of common stock issuable upon exercise of a warrant, which were previously registered pursuant to the registrant’s registration statement on Form S-3 which was declared effective on August 2, 2016 (File No. 333-212670), (ii) the resale of 10,000,000 shares of common stock by Aspire Capital Fund, LLC, which were previously registered pursuant to the registrant’s registration statement on Form S-1 along with a pre-effective amendment, which was declared effective on September 10, 2018 (File No. 333-226738), and (iii) the resale by the selling stockholders named in this prospectus of up to 5,916,120 shares of common stock upon conversion of, and for the payment of interest from time to time at our option for, convertible promissory notes, which were previously registered pursuant to the registrant’s registration statement on Form S-1 which was declared effective on November 13, 2018 (File No. 333-228184) (this subsection (b), collectively, the “Update Prospectus”).
The complete Resale Prospectus relating to the shares held by the selling stockholders named therein follows immediately. Following the Resale Prospectus are certain pages of the Update Prospectus, which include (i) an alternate front cover page, (ii) alternate sections titled “Prospectus Summary - Background of the Offering,” “Prospectus Summary - The Offering,” and “The Offering,” (iii) an alternate section titled “Use of Proceeds”, (iv) an alternate section titled “Selling Stockholders”, and (v) an alternate section titled “Plan of Distribution”. All other pages of the Resale Prospectus and the Update Prospectus are the same.
On August 17, 2018, trading of the registrant’s common stock on the Capital Market of The Nasdaq Stock Market LLC (“Nasdaq”) was suspended and the registrant’s common stock began being quoted on the OTCQB Venture Capital Market. The registrant’s common stock is deemed to be a “penny stock” as defined in the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Consequently, the registrant is no longer eligible to use Form S-3 and is no longer eligible to incorporate information by reference into Form S-1.
Pursuant to Rule 429 promulgated under the Securities Act of 1933, as amended (“Securities Act”), the prospectus forming a part of this Registration Statement on Form S-1 also relates to the registrant’s Registration Statement on Form S-3 which was declared effective on August 2, 2016 (File No. 333-212670) (the “Resale Registration Statement”), the registrant’s Registration Statement on Form S-1 and pre-effective amendment thereto, which was declared effective on September 10, 2018 (File No. 333-226738) (the “Aspire Resale Registration Statement”) and the registrant’s Registration Statement on Form S-1 which was declared effective on November 13, 2018 (File No. 333-228184) (the “Conversion Share Resale Registration Statement”). This Registration Statement, as amended, constitutes Post-Effective Amendment No. 1 to Form S-3 on Form S-1 to the Resale Registration Statement, Post-Effective Amendment No. 1 to Form S-1 to the Aspire Resale Registration Statement, and Post-Effective Amendment No. 1 to Form S-1 to the Conversion Share Resale Registration Statement. Such Post-Effective Amendments shall become effective concurrently with this Registration Statement on such date as the Securities and Exchange Commission, acting pursuant to Section 8(c) of the Securities Act, may determine.
The information in this preliminary prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.
SUBJECT TO COMPLETION, DATED APRIL 15, 201921, 2020
PROSPECTUS
PARKERVISION, INC.
12,800,000
16,809,295 Shares of Common Stock
This prospectus relates to the resale by the selling stockholders listed under the heading “Selling Stockholders” of up to 12,800,00016,809,295 shares of our common stock, par value $0.01 per share (“Common Stock”), consisting of (i) up to 7,800,0004,961,538 shares of Common Stock issuable upon conversion of, and for the payment of interest from time to time at our option, for a convertible promissory note dated September 13, 2019 which has a fixed conversion price of $0.10 per share and convertible promissory notes dated February 28, 2019 through March 13, 2019January 8, 2020 which have a fixed conversion price of $0.25$0.13 per share (the “2019 Notes”“Notes”), (ii) an aggregate of 3,907,331 shares of Common Stock issued pursuant to securities purchase agreements dated January 9, 2020, January 15, 2020, March 5, 2020 and (ii)March 19, 2020, (iii) an aggregate of 2,740,426 shares of Common Stock issued as payment for services and repayment of short-term loans and other accounts payable, including interest, (iv) up to 5,000,000 shares of Common Stock issuable upon the exercise of a five-year warrant issued on December 20, 2018, which haswith an exercise price of $0.16$0.74 per share, subject to adjustment (the “2018 Warrant”and issued pursuant to a warrant agreement with Aspire Capital Fund LLC (“Aspire”) and (v) up to 200,000 shares of Common stock issuable upon exercise of a three-year warrant with an exercise price of $1.00 per share, subject to adjustment and issued pursuant to a warrant agreement with Tailwinds Research Group LLC (“Tailwinds”).
We are registering these shares of Common Stock as required by the terms of registration rights agreements between the selling stockholders and us. The registration of the shares of Common Stock offered by this prospectus does not mean that the selling stockholders will offer or sell any of these shares. The selling stockholders may offer the shares of Common Stock at prevailing market prices at the time of sale, at prices related to the prevailing market price, at varying prices determined at the time of sale, or at negotiated prices. See “Plan of Distribution” on page 4136 for additional information.
We will not receive proceeds from the sale of the shares of Common Stock by the selling stockholders. To the extent the 2018 Warrant isAspire and Tailwinds warrants are exercised for cash, we will receive up to an aggregate of $800,000$3,900,000 in gross proceeds. We expect to use proceeds received from the exercise of the 2018 Warrant,Aspire and Tailwinds warrants, if any, to fund our patent enforcement actions and for othergeneral working capital and general corporate purposes.
The selling stockholders may be deemed to be “underwriters” within the meaning of the Securities Act. We will pay the expenses of registering these shares of Common Stock, but all selling and other expenses incurred by the selling stockholders will be paid by the selling stockholders.
Our Common Stock is listed on the OTCQB Venture Capital Market under the ticker symbol “PRKR.” On April 12, 2019, the last reported sale price per share of our Common Stock was $0.19 per share.
You should read this prospectus and any prospectus supplement carefully before you invest in any of our securities.
Investing in our securities involves a high degree of risk. See “Risk Factors” beginning on page 56 of this prospectus for a discussion of information that should be considered in connection with an investment in our securities.
Neither the Securities and Exchange Commission nor any such authority has approved or disapproved these securities or determined whether this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
TABLE OF CONTENTS
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MARKET PRICE OF OUR COMMON STOCK AND RELATED STOCKHOLDER MATTERS | 16 |
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS | 17 |
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F-1 | |
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We have not, and the selling stockholders have not, authorized anyone to provide you with information different from that contained in this prospectus or in any supplement to this prospectus or free writing prospectus, and neither we nor the selling stockholders take any responsibility for any other information that others may give you. This prospectus is not an offer to sell, nor is it a solicitation of an offer to buy, the securities in any jurisdiction where the offer or sale is not permitted. You should not assume that the information contained in this prospectus or any prospectus supplement or free writing prospectus is accurate as of any date other than the date on the front cover of those documents, regardless of the time of delivery of this prospectus or any sale of a security. Our business, financial condition, results of operations and prospects may have changed since those dates.
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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Some of the statements in this prospectus are forward-looking statements that involve risks and uncertainties. These forward-looking statements include statements about our plans, objectives, expectations, intentions and assumptions, and all other statements that are not statements of historical fact. You can identify these statements by wordsWords such as “may,” “will,” should,” “estimates,” “plans,” “expects,” “believes,” “intends” and similar expressions.expressions may identify forward-looking statements, but the absence of such words does not mean that a statement is not forward-looking. We cannot guarantee future results, levels of activity, performance or achievements. Our actual results and the timing of certain events may differ significantly from the results discussed in the forward-looking statements. Factors that might cause such a discrepancy include those discussed in “Our Company,” “Risk Factors,” and elsewhere in this prospectus and any prospectus supplements. You are cautioned not to place undue reliance on any forward-looking statements. We are under no duty to update or revise any of the forward-looking statements or risk factors to conform them to actual results or to changes in our expectations.
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This summary highlights certain selected information about us, this offering and the securities offered hereby. This summary is not complete and does not contain all of the information that you should consider before deciding whether to invest in our Common Stock. For a more complete understanding of our Company and this offering, we encourage you to read the entire prospectus, including the information presented under the section entitled “Risk Factors” and the financial data and related notes. Unless we specify otherwise, all references in this prospectus to “ParkerVision,” “we,” “our,” “us”“us,” and “our company”company,” refer to ParkerVision, Inc. and its wholly-owned German subsidiary, ParkerVision GmbH.
Our Company
We were incorporated under the laws of the state of Florida on August 22, 1989. We are in the business of innovating fundamental wireless technologies and products. We have designed and developed proprietary radio frequency (“RF”) technologies and integrated circuits for use in wireless communication products. We have expended significant financial and other resources to research and develop our RF technologies and to obtain patent protection for those technologies in the United States of America (“U.S.”) and certain foreign jurisdictions. We believe certain patents protecting our proprietary technologies have been broadly infringed by others and therefore our business plan includes 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 mobile handset providers and their chip suppliers for the infringement of a number of our RF patents. We have also designed and developed a consumer distributed WiFi product line that is marketed under the brand name Milo®Milo®. We expectrestructured our operations during the third quarter of 2018 in order to sell or otherwise exitreduce operating expenses in light of our limited capital resources. Accordingly, we significantly reduced our ongoing investment in the Milo product operationsand ceased our integrated circuit development efforts. In early 2019, we ceased substantially all ongoing research and development efforts and, where applicable, repurposed resources to support our patent enforcement and product sales and support efforts. We ceased sales of our Milo products in the secondfourth quarter of 2019 and intend to focus our resources solely on licensing and enforcement of our wireless technologies.2019.
Our business address is 7915 Baymeadows Way,9446 Philips Highway, Suite 400,5A, Jacksonville, Florida 32256 and our telephone number is (904) 732-6100. We maintain a website at www.parkervision.com.www.parkervision.com. We have not incorporated by reference into this prospectus the information on our website, and you should not consider it to be a part of this prospectus.
Background of the Offering
Convertible Notes Transactions
In February and MarchOn September 13, 2019, we sold a $50,000 convertible promissory note with a fixed conversion price of $0.10 per share to an accredited investor. On January 8, 2020, we sold an aggregate of $1.3 million$450,000 in convertible promissory notes with a fixed conversion price of $0.13 per share to accredited investors (the “2019 Notes”).investors. The 2019 Notesnotes mature five years from the date of issuance and are convertible, at the holders’ option, into shares of our Common Stock at atheir respective fixed conversion price of $0.25 per share.prices. The 2019 Notesnotes 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.
Brickell Funding
A significant portion of our litigation cost has been funded under a secured contingent payment arrangement with Brickell Key Investments, LP (“Brickell”), a special purpose fund under the management of Brickell Key Asset Management Limited, a Guernsey-based asset manager. WeThe Company entered into a Claims Proceeds Investment Agreementregistration rights agreement with Brickell on February 25, 2016, as amended from timethe purchasers of the January 2020 Notes, pursuant to time (the “CPIA”). Underwhich the CPIA, BrickellCompany committed to file a resale registration statement by the 120th calendar day following the issuance date of the January 2020 Notes and to cause the registration statement to become effective by the 180th 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 entitled to priority payment1.0% of 100%the aggregate subscription upon the occurrence of proceeds that we receive from all patent-related actions until Brickell’s aggregate investment has been repaid in full, after which time Brickell is entitled to a portion of remaining proceedsthe event, and monthly thereafter, up to a specified minimum return. maximum of 6%. The Company did not enter into a registration rights agreement with respect to the September 2019 Notes.
Sale of Common Stock
In addition, BrickellJanuary 2020, we sold an aggregate of (i) 1,169,232 shares of our Common Stock at a purchase price of $0.13 per share and (ii) 166,667 shares of our Common Stock at a purchase price of $0.15 per share in private placement transactions with accredited investors for aggregate proceeds of approximately $177,000. In March 2020, we sold an aggregate of 2,571,432 shares of our Common Stock at a purchase price of $0.35 per share in a private placement transaction with accredited investors for aggregate proceeds of approximately $900,000.
The Company also entered into registration rights agreements with each of the purchasers of Common Stock. The Company committed to file and cause a resale registration statement to become effective within a certain amount of time following the issuance of the shares, described more fully in the section titled “The Private Placements”. The registration rights agreements provide 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 respective deadlines. The amount of the liquidated damages is entitled1.0% of the aggregate subscription upon the occurrence of the event, and monthly thereafter, up to a pro rata portionmaximum of proceeds from specified legal actions to the extent aggregate proceeds from those actions exceed the specified minimum return. 6%.
On December 21, 2018, Brickell exercised a right of first offer under the CPIA to provide $2.5 million in additional funding for purposes of advancing our patent assertion program. As consideration for the
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Repayment of Outstanding Obligations
We issued an aggregate of 2,740,426 shares of our Common Stock in January and February 2020 as payment for services and repayment of outstanding obligations including (i) 214,000 shares as repayment of approximately $28,000 in principal and accrued interest on a June 2019 unsecured promissory note, (ii) 500,000 shares as repayment of approximately $75,000 in outstanding amounts payable to a related party, (iii) 1,526,426 shares as repayment of approximately $237,000 in principal and accrued interest on a May 2019 unsecured promissory note, and (iv) 500,000 shares as payment of a retainer valued at $150,000 for services provided under an 18-month consulting agreement with Chelsea Investor Relations (“Chelsea”).
additional investment,Issuance of Warrants
On February 28, 2020, we entered into a warrant amendment agreement (“Warrant Amendment Agreement”) with Aspire Capital Fund, LLC (“Aspire”) with respect to warrants issued Brickellto Aspire in July and September 2018 that were exercisable, collectively, into 5,000,000 shares of our Common Stock (the “2018 Warrants”). The Warrant Amendment Agreement provides for a reduction in the exercise price for the 2018 Warrant, which providesWarrants from $0.74 to $0.35 per share and the issuance of a new warrant for the purchase of up to 5,000,000 million shares of our Common Stock at an exercise price of $0.16$0.74 per share.share (the “New Aspire Warrant”). The 2018New Aspire Warrant is immediately exercisable, expires five years from the date of issuance and includes cashlessissuance. On March 16, 2020, we issued Tailwinds Research Group LLC (“Tailwinds”) a warrant for the purchase of up to 200,000 shares of our Common Stock at an exercise and registration rights. In addition,price of $1.00 per share in connection with the transaction, we amended the CPIA to provide that in the eventa digital marketing services agreement. The Tailwinds warrant expires three years from date of a change in control of the Company, Brickell has the right to be paid its return as defined under the CPIA based on the transaction price for the change in control event. issuance.
To date, including the additional funds received in December 2018, we have received an aggregate of $18.0 million from Brickell under the CPIA and have repaid an aggregate of $3.3 million to Brickell from patent enforcement proceeds.
The Offering
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Common Stock being offered by the selling stockholders (1) |
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Common Stock outstanding prior to the Offering |
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Common Stock outstanding after the Offering | 53,264,283 (3) |
Terms of Offering | The selling stockholders will determine when and how they will sell the Common Stock offered hereby, as described in “Plan of Distribution” beginning on page |
Use of proceeds | The selling stockholders will receive all of the proceeds from the sale of the shares offered under this prospectus. We will not receive proceeds from the sale of the shares by the selling stockholders. However, to the extent the |
OTCQB Symbol | PRKR |
Risk Factors | Investing in our securities involves a high degree of risk. You should carefully review and consider the “Risk Factors” section of this prospectus for a discussion of factors to consider before deciding to invest in shares of our Common Stock. |
(1) | Assumes conversion of the |
(2) | This amount includes (i) an aggregate of 3,907,331 shares of Common Stock issued pursuant to securities purchase agreements in January and March 2020, which shares are being registered hereby and (ii) an aggregate of 2,740,426 shares of Common Stock issued as payment for services and repayment of short-term loans and other accounts payable, including interest, which shares are being registered hereby. This amount does not include: |
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· | Unvested restricted stock units (RSUs) and options for the purchase of up to 12,927,524 additional shares of Common Stock; |
· | Warrants to purchase up to 15,920,000 additional shares of Common Stock, including the 5,200,000 shares issuable upon exercise of the Aspire and Tailwinds warrants registered hereby; |
· | Up to 23,807,152 shares of Common Stock issuable upon the conversion of the outstanding principal amount of our convertible promissory notes, including the 3,961,538 shares underlying the principal amounts of the Notes registered hereby; |
· | Up to an estimated 8,034,501 additional shares of Common Stock issuable upon the payment in shares of interest on outstanding convertible promissory notes, including the 1,000,000 estimated interest shares for the Notes registered hereby; and |
· | 294,600 shares of Common Stock that have been reserved for issuance in connection with future grants under our long-term equity incentive plans. |
(3) | This amount includes the estimated 4,961,538 shares issuable upon conversion of, and for the payment of interest from time to time at our option on, the Notes and all 5,200,000 shares issuable upon exercise of the Aspire and Tailwinds warrants. |
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You should carefully consider the risks and uncertainties described below. The risks and uncertainties described below are not the only ones facing us. Additional risks not presently known to us or that we currently believe are immaterial may also impair our business operations. Our business, financial condition or results of operation could be materially adversely affected by any of these risks. The trading price of our Common Stock could decline because of any one of these risks, and you may lose all or part of your investment.
Financial and Operating Risks
Our financial condition raises substantial doubt as to our ability to continue as a going concern.
We have had significant losses and negative cash flows in every year since inception, and continue to have an accumulated deficit which, at December 31, 2018,2019, was approximately $392.3$401.8 million. Our net losses for the years ended December 31, 20182019 and 20172018 were approximately $20.9$9.5 million and $19.3$20.9 million, respectively. Our independent registered public accounting firm has included in their audit opinion on our consolidated financial statements as of and for the year ended December 31, 2018,2019, a statement with respect to substantial doubt about our ability to continue as a going concern. Note 2 to our consolidated financial statements included elsewhere in this prospectus includes a discussion regarding our liquidity and our ability to continue as a going concern. Our consolidated financial statements have been prepared assuming we will continue to operate as a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. If we become unable to continue as a going concern, we may have to liquidate our assets and the values we receive for our assets in liquidation or dissolution could be significantly lower than the values reflected in our consolidated financial statements. The substantial doubt as to our ability to continue as a going concern may adversely affect our ability to negotiate reasonable terms with our vendors and may adversely affect our ability to raise additional capital in the future.
We have had a history of losses which may ultimately compromise our ability to implement our business plan and continue in operation.
To date, our technologies and products have not produced revenues sufficient to cover our operating costs. We will continue to make expenditures on patent protection and enforcement and general operations in order to secure and fulfill any contracts that we achieve for the sale ofcontinue our productscurrent patent enforcement efforts. Those efforts may not produce a successful financial outcome in 2020, or technologies.at all. Without a successful financial outcome from one or more of our current patent enforcement efforts, our revenues in 2019we will not bring us to profitability andachieve profitability. Furthermore, our current capital resources willare not be sufficient to sustain our operations through 2019.2020. If we are not able to generate sufficient revenues or obtain sufficient capital resources, we will not be able to implement our business plan or meet our current obligations due within the twelve months after the issuance date of our consolidated financial statements and investors will suffer a loss in their investment. This may also result in a change in our business strategies.
We will need to raise substantial additional capital in the future to fund our operations. Failure to raise such additional capital may prevent us from implementing our business plan as currently formulated.
Because we have had net losses and, to date, have not generated positive cash flow from operations, we have funded our operating losses primarily from the sale of debt and equity securities, including our secured contingent debt obligation. Our capital resources include cash and cash equivalents of $1.5$0.06 million at December 31, 2018. In addition, we received2019 and proceeds of $1.3approximately $2.1 million inreceived during the first quarter of 20192020 from the sale of convertible notes.various debt and equity transactions. Although we implemented significant cost reduction measures in August 2018 and 2019, our business plan will continue to require expenditures for patent protection and enforcement and general operations. For the years ended December 31, 20182019 and 2017,2018, we used $10.3$3.4 million and $14.1$10.3 million, respectively in cash for operations which was funded primarily through
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the sale of convertible debt and equity securities. Our current capital resources will not be sufficient to meet our working capital needs for the twelve months after the issuance of our consolidated financial statements and we will require additional capital to fund our operations. Additional capital may be in the form of debt securities, the sale of equity securities, including common or preferred stock, additional litigation funding, or a combination thereof. Failure to raise additional capital will have a material adverse impact on our ability to achieve our business objectives.
If we are unsuccessful in executing our cost reduction measures, our business and results of operations may be adversely affected.
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In August 2018, we implemented cost reduction measures in order to focus our limited resources on our patent enforcement program. These cost reduction measures included a significant reduction in our workforce, a reduction in executive management salaries, the closure of our engineering design center in Lake Mary, Florida, cessation of our chip development activities, and significant curtailment of sales and marketing expenditures for our WiFi products. We expect these cost reduction measures to be fully captured by the end of 2019, and we estimate that we will recognize annualized savings of approximately $9 million. However, we cannot provide assurance that our anticipated cost savings will be fully realized or that business and financial results will improve. Our ability to achieve the anticipated costs savings and other benefits is subject to economic, competitive and other uncertainties, some of which are beyond our control. We may experience delays in the timing of certain cost reduction efforts or unanticipated costs in implementing them. Moreover, changes in the size, alignment or organization of our workforce could adversely affect employee morale and retention, relations with customers, vendors and business partners, and impair our ability to realize our current or future business and financial objectives. If we do not succeed in our cost reduction efforts, if these efforts are more costly or time-consuming than anticipated, if we experience delays or if other unforeseen events occur, our business and results of operations may be adversely affected.
Raising additional capital by issuing debt securities or additional equity securities may result in dilution and/or impose covenants or restrictions that create operational limitations or other obligations.
We will require additional capital to fund our operations and meet our current obligations due within the twelve months after the issuance date of our consolidated financial statements. Financing, if any, may be in the form of debt or sales of equity securities, including common or preferred stock. Debt instruments or the sale of preferred stock may result in the imposition of operational limitations and other covenants and payment obligations, any of which may be burdensome to us and may have a material adverse impact on our ability to implement our business plan as currently formulated. The sale of equity securities, including common or preferred stock, may result in dilution to the current stockholders’ ownership and may be limited by the number of shares we have authorized and available for issuance. For example, we are party to a common stock purchase agreement dated October 17, 2017 with Aspire Capital. The sale of shares of common stock pursuant to this agreement has the potential to be significantly dilutive to our shareholders. Under the agreement, Aspire Capital committed to purchase up to an aggregate of $20 million in shares of our common stock over the 30-month term of the agreement at purchase prices based on the market price of our common stock, assuming a minimum price of $0.50 per share. To date, we have sold 3.7 million shares of common stock to Aspire Capital under the agreement, which represents approximately 12.8% of our current total shares outstanding, for an aggregate purchase price of approximately $3.1 million. We have the ability to sell up to an additional $16.9 million in shares (or 33.8 million shares assuming a purchase price of $0.50 per share) under the agreement, subject to certain daily limits and provided that, among other things, the shares are registered for resale by Aspire Capital and we have sufficient authorized shares under our articles of incorporation.
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We may be obligated to repay outstanding notes at a premium upon the occurrence of an event of default.
We have $3.2$2.3 million in secured and unsecured notes payable and $1.2$3.6 million in outstanding principal under convertible notes payable at December 31, 20182019 and we have an additional $1.3$0.5 million in outstanding principal under convertible notes issued in the first quarter of 2019.2020. If we fail to comply with the various covenants set forth in each of the notes, including failure to pay principal or interest when due or, under certain notes, consummating a change in control, we could be in default thereunder. Upon an event of default under each of the notes, the interest rate of the notes will increase to 12% per annum and the outstanding principal balance of the notes plus all accrued unpaid interest may be declared immediately payable by the holders. We may not have sufficient available funds to repay the notes upon an event of default, and we cannot provide assurances that we will be able to obtain other financing at terms acceptable to us, or at all.
Our ability to utilize our tax benefits could be substantially limited if we fail to generate sufficient income or if we experience an “ownership change.”
We have cumulative net operating loss carryforwards (“NOLs”NOLs”) totaling approximately $336.4$335.1 million at December 31, 2018,2019, of which $323.5$314.8 million is subject to expiration in varying amounts from 20192020 to 2036.2037. Our ability to fully recognize the benefits from those NOLs is dependent upon our ability to generate sufficient income prior to their expiration. In addition, our NOL carryforwards may be limited if we experience an ownership change as defined by Section 382 of the Internal Revenue Code.Code (“Section 382”). In general, an ownership change under Section 382 occurs if 5% shareholders increase their collective ownership of the aggregate amount of our outstanding shares by more than 50 percentage points over a relevant lookback period. The sale of additional equity securities may trigger an ownership change under Section 382 which will significantly limit our ability to utilize our tax benefits. In order to avoid limitations imposed by Section 382, of the Code, we may be limited in the amount of additional equity securities we are able to sell to raise capital.
Our litigation funding arrangements may impair our ability to obtain future financing and/or generate sufficient cash flows to support our future operations.
We have funded much of our cost of litigation through contingent financing arrangements with Brickell and contingent fee arrangements with legal counsel. The repayment obligation to Brickell is secured by the majority of our assets until such time that we have repaid a specified minimum return. Furthermore, our contingent financing arrangements will result in reductions in the amount of net proceeds retained by us from litigation, licensing and other patent-related activities. For example, Brickell is currently entitledThe contingent fees payable to priority paymentothers could exceed half of at least the next $14.7 million in patent-relatedour future proceeds received by us. Thereafter, any remaining netdepending on size and timing of proceeds, will be prorated between us, our legal counsel and Brickell.among other factors. The long-term continuation of our business plan is dependent upon our ability to secure sufficient financing to support our business, and our ability to generate revenues and/or patent related proceeds sufficient to offset expenses and meet our contingent payment obligation. Failure to generate revenue or other patent-related proceeds sufficient to repay our contingent obligation may impede our ability to obtain additional financing which will have a material adverse effect on our ability to achieve our long-term business objectives.
Our litigation can be time-consuming, costly and we cannot anticipate the results.
Since 2011, we have spent a significant amount of our financial and management resources to pursue patent infringement litigation against third parties. We believe this litigation, and other litigation matters that we may in the future determine to pursue, couldwill continue to consume management and financial resources for long periods of time. There can be no assurance that our current or future litigation matters will ultimately result in a favorable outcome for us.us or that our financial resources will not be exhausted before achieving a favorable outcome. In addition, even if we obtain favorable interim rulings or verdicts in particular litigation matters, they may not be predictive of the ultimate resolution of the matter. Unfavorable outcomes could result in exhaustion of our financial resources and could
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otherwise hinder our ability to pursue licensing and/or product opportunities for our technologies which wouldin the future. Failure to achieve favorable outcomes from one or more of our patent enforcement actions will have a material adverse impact on our financial condition, results of operations, cash flows, and business prospects. We have contingent fee arrangements in place with others to reduce our litigation related expenditures; however any litigation-based or other patent-related amounts collected by us will be subject to contingency payments to our legal counsel and other funding parties which will reduce the amount retained by us.
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If our patents and intellectual property rights do not provide us with the anticipated market protections, our competitive position, business, and prospects will be impaired.
We rely on our intellectual property rights, including patents and patent applications, to provide competitive advantage and protect us from theft of our intellectual property. We believe that our patents are for entirely new technologies and that our patents are valid, enforceable and valuable. However, third parties have made claims of invalidity with respect to certain of our patents and other similar claims may be brought in the future. For example, the Federal Patent Court in Munich recently invalidated one of our patents that iswas the subject of infringement cases against LG and Apple in Germany following a nullity claim filed by Qualcomm. If our patents are shown not to be as broad as currently believed, or are otherwise challenged such that some or all of the protection is lost, we will suffer adverse effects from the loss of competitive advantage and our ability to offer unique products and technologies. As a result, there would be an adverse impact on our financial condition and business prospects. Furthermore, defending against challenges to our patents may give rise to material costs for defense and divert resources away from our other activities.
Our business, results of operations, and financial condition may be impacted by the recent coronavirus (COVID-19) outbreak.
The global spread of COVID-19 has created significant volatility and uncertainty in financial markets. If such volatility and uncertainty persist, we may be unable to raise additional capital on terms that are acceptable to us, or at all. Additionally, in response to the pandemic, governments and the private sector have taken a number of drastic measures to contain the spread of COVID-19. While our employees currently have the ability and are encouraged to work remotely, such measures may have a substantial impact on employee attendance or productivity, which, along with the possibility of employees’ illness, may adversely affect our operations.
In addition, COVID-19 is expected to negatively impact the timing of our current patent infringement actions as a result of office closures, travel restrictions and court closures. For example, each of our patent infringement cases in Florida have motions pending or granted for the extension of certain court deadlines due to the impact of COVID-19.
Although COVID-19 is currently not material to our results of operations, there is significant uncertainty relating to the potential impact of COVID-19 on our business. The extent to which COVID-19 impacts our ongoing patent enforcement actions and our ability to obtain financing, as well as our results of operations and financial condition, generally, will depend on future developments which are highly uncertain and cannot be predicted, including new information which may emerge concerning the severity of COVID-19 and the actions taken by governments and private businesses to contain COVID-19 or treat its impact, among others. If the disruptions posed by COVID-19 continue for an extensive period of time, our business, results of operations, and financial condition may be materially adversely affected.
We are subject to outside influences beyond our control, including new legislation that could adversely affect our licensing and enforcement activities and have an adverse impact on the execution of our business plan.
Our licensing and enforcement activities are subject to numerous risks from outside influences, including new legislation, regulations and rules related to obtaining or enforcing patents. For instance, the U.S. has enacted sweeping changes to the U.S. patent system including changes that transition the U.S. from a “first-to-invent” to a “first-to-file” system and that alter the processes for challenging issued patents. To the extent that we are unable to secure patent protection for our future technologies and/or our current patents are challenged such that some or all of our protection is lost, we will suffer adverse effects to our ability to offer unique products and technologies. As a result, there would be an adverse impact on our financial position, results of operations and cash flows and our ability to execute our business plan.
Our industry is subject to rapid technological changes which if we are unable to match or surpass, will result in a loss of competitive advantage and market opportunity.
Because of the rapid technological development that regularly occurs in the wireless technology industry, along with shifting user needs and the introduction of competing products and services, we have historically devoted substantial resources to developing and improving our technology and introducing new product offerings. As a result of our 2018 cost reduction measures,limited financial resources, we do not expect to continue to spend a significant amount in this area in the futurehave ceased our research and development activities which could result in a loss inof future market opportunity and obsolescence of our products which could adversely affect our future revenue potential.
If our technologies and/or products are not commercially accepted, our developmental investment will be lost and our ability to do business will be impaired.
There can be no assurance that our research and development will produce commercially viable technologies and products, or that our technologies and products will be established in the market as improvements over current competitive offerings. If our existing or new technologies and products are not commercially accepted, the funds expended will not be recoverable, and our competitive and financial position will be adversely affected. In addition, perception of our business prospects will be impaired with an adverse impact on our ability to do business and to attract capital and employees.
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If we fail to properly estimate customer demand for our products, an oversupply of component parts could result in excess or obsolete inventory that could adversely affect our operating results.
Our operating results would be adversely affected if, anticipating greater demand for our products than actually develops, we commit to the purchase of more component parts than we need which is more likely to occur in a period of demand uncertainties such as during the rollout of a new product line like our Milo product line. In addition, component purchase commitments made by us in order to shorten lead times could also lead to excess and obsolete inventory charges. If we fail to anticipate customer demand properly, an oversupply of component parts could result in excess or obsolete components that could adversely affect our gross margins and operating results. For example, the demand for our Milo product line to date has been significantly less than anticipated resulting in an oversupply of both component parts and finished products. We incurred impairment charges for the year ended December 31, 2018 of approximately $1.1 million as a result of this excess inventory. These impairment charges adversely affect our gross margins and operating results.
If we experience quality issues with our products, our competitive position, business and market opportunity may be impaired.
We produce products that incorporate leading-edge technology, including both hardware and software. Software typically contains bugs that can unexpectedly interfere with expected operations. There can be no assurance that our pre-shipment testing programs will be adequate to detect all defects, either ones in individual products or ones that could affect numerous shipments, which might interfere with customer satisfaction, reduce sales opportunities, or affect gross margins. If we have to replace certain components and provide remediation in response to the discovery of defects or bugs in products that we had shipped, there can be no assurance that such remediation would not have a material impact. An inability to cure a product defect could result in the failure of a product line, damage to our reputation, inventory costs, or product reengineering expenses, any of which could have a material impact on our revenue, margins, and net losses.
We are highly dependent on Mr. Jeffrey Parker as our chief executive officer. If his services were lost, it would have an adverse impact on the execution of our business plan.
Because of Mr. Parker’s leadership position in the company, and the respectrelationships he has garnered in both the industry in which we operate and the investment community, and the key role he plays in our patent litigation strategies, the loss of his services might be seen as an impediment to the execution of our business plan. If Mr. Parker was no longer available to the company, investors might experience an adverse impact on their investment. We maintain $5 million in key-employee life insurance for our benefit for Mr. Parker.
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If we are unable to attract or retain key executives and other highly skilled employees, we will not be able to execute our current business plans.
Our business is dependent on having skilled and specialized key executives and other employees to conduct our business activities. The inability to obtain or retain these key executives and other specialized employees would have an adverse impact on the research, development, and technical support activities and the financial reporting and regulatory compliance activities that our business requires. These activities are instrumental to the successful execution of our business plan.
Any disruptions to our information technology systems or breaches of our network security could interrupt our operations, compromise our reputation, and expose us to litigation, government enforcement actions, and costly response measures and could have a material adverse effect on our business, financial condition and results of operations.
We rely on information technology systems, including third-party hosted servers and cloud-based servers, to keep business, financial, and corporate records, communicate internally and externally, and operate other critical functions. If any of our internal systems or the systems of our third-party providers are compromised due to computer virus, unauthorized access, malware, and the like, then sensitive
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documents could be exposed or deleted, and our ability to conduct business could be impaired. Cyber incidents can result from deliberate attacks or unintentional events. These incidents can include, but are not limited to, unauthorized access to our systems, computer viruses or other malicious code, denial of service attacks, malware, ransomware, phishing, SQL injection attacks, human error, or other events that result in security breaches or give rise to the manipulation or loss of sensitive information or assets. Cyber incidents can be caused by various persons or groups, including disgruntled employees and vendors, activists, organized crime groups, and state-sponsored and individual hackers. Cyber incidents can also be caused or aggravated by natural events, such as earthquakes, floods, fires, power loss, and telecommunications failures. The risk of cybersecurity breach has generally increased as the number, intensity, and sophistication of attempted attacks from around the world has increased. While we have cyber security procedures in place, given the evolving nature of these threats, there can be no assurance that we will not suffer material losses in the future due to cyber-attacks.
To date, we have not experienced any material losses relating to cyber-attacks, computer viruses or other systems failures. Although we have taken steps to protect the security of data maintained in our information systems, it is possible that our security measures will not be able to prevent the systems’ improper functioning or the improper disclosure of personally identifiable information, such as in the event of cyber-attacks. In addition to operational and business consequences, if our cybersecurity is breached, we could be held liable to our customers or other parties in regulatory or other actions, and we may be exposed to reputation damages and loss of trust and business. This could result in costly investigations and litigation, civil or criminal penalties, fines and negative publicity.
Risks Relating To Our Common Stock
Our outstanding options warrants, and restricted stock unitswarrants may affect the market price and liquidity of the common stock.
At December 31, 2018,2019, we had 28.734.1 million shares of common stock outstanding and had outstanding options warrants and restricted stock unitswarrants for the purchase of up to 14.523.6 million additional shares of common stock, of which approximately 9.115.6 million were exercisable as of December 31, 2018. The outstanding warrants include pre-funded warrants for the purchase of up to 2.9 million shares of common stock at an exercise price of $0.01 per share.2019. In addition, as described more fully below, holders of convertible notes may elect to receive a substantial number of shares of common stock upon conversion of the notes and we may elect to pay accrued interest on the notes in shares of our common stock. All of the shares of common stock underlying these securities are or will be registered for sale to the holder or for public resale by the holder. The amount of common stock reserved for issuance may have an adverse impact on our ability to raise capital and may affect the price and liquidity of our common stock in the public market. In addition, the issuance of these shares of common stock will have a dilutive effect on current stockholders’ ownership.
The conversion of outstanding convertible notes into shares of common stock, and the issuance of common stock by us as payment of accrued interest upon the convertible notes, could materially dilute our current stockholders.
We have aggregate principal of $1.2$3.6 million in convertible notes outstanding at December 31, 2018.2019. The notes are convertible into shares of our common stock at fixed conversion prices, which may be less than the market price of our common stock at the time of conversion. If the entire principal is converted into shares of common stock, we would be required to issue an aggregate of up to 2.720.8 million shares of common stock. In addition, in the first quarter of 2019,2020, we issued an additional aggregate principal amount of $1.3$0.5 million in convertible notes which, if converted at the fixed conversion price, would result in the issuance of an additional 5.23.5 million shares of our common stock. If we issue all of these shares, the ownership of our current stockholders will be diluted.
Further, we may elect to pay interest on the notes, inat our option, in shares of common stock, at a price equal to the then-market price for our common stock. To date, we have issued approximately 1.9 million shares of common stock as in-kind interest payments on our convertible notes. We currently do not believe that we will have the financial ability to make all payments on the notes in cash when due. Accordingly, we currently intend to
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make such payments in shares of our common stock to the greatest extent possible. Such interest payments could further dilute our current stockholders.
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The price of our common stock may be subject to substantial volatility.
The trading price of our common stock has been and may continue to be volatile. Between January 1, 20172018 and December 31, 2018,2019, the reported high and low sales prices for our common stock ranged between $0.13$0.06 and $3.80$1.25 per share. The price of our common stock may continue to be volatile as a result of a number of factors, some of which are beyond our control. These factors include, but are not limited to, developments in outstanding litigation, our performance and prospects, general conditions of the markets in which we compete, and economic and financial conditions.conditions, and the impact of COVID-19 on global financial markets. Such volatility could materially and adversely affect the market price of our common stock in future periods.
Our common stock was delisted from the Nasdaq Capital Market and is now quoted on OTCQB, an over-the-counter market. There can be no assurance that our common stock will continue to trade on the OTCQB or on another over-the-counter market or securities exchange.
Trading of our common stock on the Nasdaq Capital Market was suspended effective at the open of business on August 17, 2018 as a result of our failure to maintain at least $35 million in market value of listed securities. Our common stock began trading on the OTCQB, an over-the-counter market, immediately following delisting from Nasdaq, under the symbol “PRKR”. The over-the-counter market is a significantly more limited market than Nasdaq, and the quotation of our common stock on the over-the-counter market may result in a less liquid market available for existing and potential stockholders to trade shares of our common stock. Securities traded in the over-the-counter market generally have less liquidity due to factors such as the reduced number of investors that will consider investing in the securities, the reduced number of market makers in the securities, and the reduced number of securities analysts that follow such securities. As a result, holders of shares of our common stock may find it difficult to resell their shares at prices quoted in the market or at all. We may be subject to additional compliance requirements under applicable state laws relating to the issuance of our securities. This could have a long-term adverse effect on our ability to raise capital, which ultimately could adversely affect the market price of our common stock. Delisting could also have other negative results, including the potential loss of confidence by employees, the loss of institutional investor interest and fewer business development opportunities. We cannot provide any assurances as to if or when we will be in a position to relist our common stock on a nationally-recognized securities exchange.
Our common stock is classified as a “penny stock” under SEC rules, which means broker-dealers who make a market in our stock will be subject to additional compliance requirements.
Our common stock is deemed to be a "penny stock" as defined in the Securities Exchange Act of 1934 (the “Exchange Act”“Exchange Act”). Penny stocks are stocks (i) with a price of less than five dollars per share; (ii) that are not traded on a recognized national exchange; (iii) whose prices are not quoted on an automated quotation system sponsored by a recognized national securities association; or (iv) whose issuer has net tangible assets less than $2,000,000 (if the issuer has been in continuous operation for at least three years); or $5,000,000 (if continuous operations for less than three years); or with average revenues of less than $6,000,000 for the last three years. The Exchange Act requires broker-dealers dealing in penny stocks to provide potential investors with a document disclosing the risks of penny stocks and to obtain a manually signed and dated written receipt of the document before effecting any transaction in a penny stock for the investor’s account. Potential investors in our common stock are urged to obtain and read such disclosure carefully before purchasing any shares that are deemed to be “penny stock.” Further, the Exchange Act requires broker-dealers dealing in penny stocks to approve the account of any investor for transactions in such stocks before selling any penny stock to that investor. These procedures require the broker-dealer to (i) obtain from the investor information concerning his, her or its financial situation, investment experience and investment objectives; (ii) reasonably determine, based on that information, that transactions in penny stocks are suitable for the investor, and that the investor has sufficient knowledge and experience as to be reasonably capable of evaluating the risks of penny stock transactions;
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(iii) provide the investor with a written statement setting forth the basis on which the broker dealer made the determination in (ii) above; and (iv) receive a signed and dated copy of such statement from the investor, confirming that it accurately reflects the investor’s financial situation, investment experience and investment objectives. Compliance with these requirements may affect the ability or willingness of broker-dealers to sell our securities, and accordingly would affect the ability of stockholders to sell their securities in the public market. These additional procedures could also limit our ability to raise additional capital in the future.
We do not currently pay dividends on our common stock and thus stockholders must look to appreciation of our common stock to realize a gain on their investments.
We do not currently pay dividends on our common stock and intend to retain our cash and future earnings, if any, to fund our business plan. Our future dividend policy is within the discretion of our board of directors and will depend upon various factors, including our business, financial condition, results of operations and capital requirements. We therefore cannot offer any assurance that our board of directors will determine to pay special or regular dividends in the future. Accordingly, unless our board of directors determines to pay dividends, stockholders will be required to look to appreciation of our common stock to realize a gain on their investment. There can be no assurance that this appreciation will occur.
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Provisions in our certificate of incorporation and by-laws could have effects that conflict with the interest of shareholders.
Some provisions in our certificate of incorporation and by-laws could make it more difficult for a third party to acquire control of us. For example, our board of directors is divided into three classes with directors having staggered terms of office, our board of directors has the ability to issue preferred stock without shareholder approval, and there are advance notification provisions for director nominations and submissions of proposals from shareholders to a vote by all the shareholders under the by-laws. Florida law also has anti-takeover provisions in its corporate statute.
We have a shareholder protection rights plan that may delay or discourage someone from making an offer to purchase the company without prior consultation with the board of directors and management, which may conflict with the interests of some of the shareholders.
On November 17, 2005, as amended on November 20, 2015, our board of directors adopted a shareholder protection rights plan which called for the issuance, on November 29, 2005, as a dividend, of rights to acquire fractional shares of preferred stock. The rights are attached to the shares of common stock and transfer with them. In the future the rights may become exchangeable for shares of preferred stock with various provisions that may discourage a takeover bid. Additionally, the rights have what are known as “flip-in” and “flip-over” provisions that could make any acquisition of the company more costly. The principal objective of the plan is to cause someone interested in acquiring the company to negotiate with the board of directors rather than launch an unsolicited bid. This plan may limit, prevent, or discourage a takeover offer that some shareholders may find more advantageous than a negotiated transaction. A negotiated transaction may not be in the best interests of the shareholders.
Sales of substantial amounts of our Common Stock by the selling stockholders, or the perception that these sales could occur, could adversely affect the price of our Common Stock.
The sale by the selling stockholders of a significant number of shares of Common Stock, or the perception in the public markets that these sales will occur, could have a material adverse effect on the market price of our Common Stock.
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The selling stockholders will receive all of the proceeds from the sale of the shares of Common Stock offered under this prospectus. We will not receive proceeds from the sale of the shares by the selling stockholders. However, to the extent the 2018 Warrant isAspire and Tailwinds warrants are exercised for cash, we will receive up to an aggregate of $800,000$3,900,000 in gross proceeds. We expect to use the proceeds received from the exercise of the 2018 Warrant,Aspire and Tailwinds warrants, if any, to fund our patent enforcement actions and for other working capital and general corporate purposes.
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THE OFFERINGPRIVATE PLACEMENTS
Convertible NotesNote Transactions
Between February 28, 2019 and March
On September 13, 2019, we entered into a securities purchase agreements (“Purchase Agreements”)agreement for the sale of thea convertible promissory note for proceeds of $50,000 with an accredited investor (the “September 2019 Notes for aggregate proceeds to us of $1.3 million.Note”). The principal and unpaid interest accrued on the September 2019 Notes,Note is convertible into shares of our Common Stock at a fixed conversion price of $0.25.$0.10 per share. Any unconverted outstanding principal and unpaid interest accrued on the September 2019 NotesNote is payable in cash on or about the five year anniversary of the issuance date.September 13, 2024.
At any time following the one-year anniversary of the issuance date, we may prepay the then outstanding principal amount of the September 2019 Notes,Note, along with any unpaid accrued interest (the “Prepayment Amount”) upon thirty days’ written notice. The holder will have the right within twenty days to convert all or a portion of the Prepayment Amount into shares of Common Stock at the fixed conversion price. Any Prepayment Amount paid in cash will include a premium of 25% prior to the two-year anniversary of the date such note was issued, 20% prior to the three-year anniversary of the date such note was issued, 15% prior to the four-year anniversary of the date such note was issued, or 10% thereafter.
On January 8, 2020, we entered into securities purchase agreements for the sale of convertible promissory notes for aggregate proceeds of $450,000 with accredited investors (the “January 2020 Notes”). The principal and unpaid interest accrued on the January 2020 Notes is convertible into shares of our Common Stock at a fixed conversion price of $0.13 per share. Any unconverted outstanding principal and unpaid interest accrued on the January 2020 Notes is payable in cash on the January 8, 2025 (the “Maturity Date”), except that the Maturity Date will be automatically extended by one-year increments for an aggregate of up to ten years, unless the holder, at the holder’s sole option, revokes the automatic extension. The January 2020 Notes may not be prepaid by us.
Interest of 8% per annum is payable on the September 2019 Note and the January 2020 Notes (collectively, the “Notes”) in quarterly installments beginning on the first three-month anniversary of the issuance date following the effectiveness of the registration statement related thereto,thereto. The interest rate on the January 2020 Notes decreases to 2% per annum if the Maturity Date extends beyond January 8, 2025. The holders of the January 2020 Notes have the option to defer each interest payment for a period of six months. Interest on the Notes may be paid, at our option, subject to certain equity conditions, in either (i) cash, or (ii) shares of Common Stock, or (iii) a combination of cash and shares of Common Stock. If we elect to pay accrued interest in shares of Common Stock, the price per share will be determined by the then-market price of the Common Stock, which may be less than the stated conversion price of the 2019 Notes.
The 2019 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 Agreementssecurities purchase agreements or 2019 Notes, (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 2019 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 2019 Notes.
We also entered into a registration rights agreements (the “Registration Rights Agreements”)agreement with the holders of the 2019January 2020 Notes pursuant to which we agreed to register the shares of Common Stock underlying the 2019 Notes. We committed to file thea registration statement bywithin 120 calendar days of the 45th calendar day following the closingissuance date of the 2019 Notes and to cause the registration statement to become effective bywithin 180 calendar days following the 45th calendar day following each respective closing date of the 2019 Notes (or the 120thwithin 210 calendar daydays in the event of a full review of the registration statement by the SEC). The Registration Rights Agreements provideregistration rights agreement provides for liquidated damages upon the occurrence of certain events including failure by us to file the registration statement or cause it to become effective by the deadlines set forth above. The amount of the liquidated damages is 1.0% of the aggregate subscription amount paid by the holders for the 2019January 2020 Notes upon the occurrence of the event, and monthly thereafter, up to a maximum of 6%., or approximately $27,000. The Company did not enter into a registration rights agreement with the holder of the September 2019 Note.
Brickell Funding
A significant portionSale of Common Stock
On January 9, 2020, we entered into securities purchase agreements with accredited investors for an aggregate of 1,169,232 shares of our litigation costs has been funded underCommon Stock at a secured contingent payment arrangementprice of $0.13 per share. On January 15, 2020, we entered into a securities purchase agreement with Brickell Key Investments, LP (“Brickell”an accredited investor for 166,667 shares of our Common Stock at $0.15 per share. We received aggregate proceeds from the January 9, 2020 and January 15, 2020 transactions (collectively, the “January 2020 PIPE”), of $177,000. On March 5, 2020 and March 13, 2020, we entered into securities purchase agreements with accredited investors for an aggregate of 2,571,432 shares of our Common Stock at a special purpose fund underprice of $0.35 per share (collectively, the management“March 2020 PIPE”). We received aggregate proceeds from the March 2020 PIPE of Brickell Key Asset Management Limited,$900,000.
We entered into a Guernsey-based asset manager. On December 21, 2018, Brickell exercised a right underregistration rights agreements in connection with the Claims Proceeds Investment Agreement between BrickellJanuary 2020 PIPE and the Company,March 2020 PIPE pursuant to which we agreed to register the shares of Common Stock. We committed to file a registration statement within 60-120 calendar days of the transaction date and to cause the registration statement to become effective within 120-180 calendar days following the closing date (or within 180-210 calendar days in the event of a full review of the registration statement by the SEC). The registration rights
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agreements provide for liquidated damages upon the occurrence of certain events including failure by us to file the registration statement or cause it to become effective by the deadlines set forth above. The amount of the liquidated damages is 1.0% of the aggregate subscription amount held by the accredited investors upon the occurrence of the event, and monthly thereafter, up to a maximum of 6%, or approximately $64,000.
Repayment of Outstanding Obligations and Payment for Services
On January 9, 2020, we issued 214,000 shares of our Common stock as repayment in-kind of approximately $28,000 in principal and interest, pursuant to a promissory note with Mark Fisher dated February 25, 2016,June 7, 2019, as amended from time(the “Fisher Note”). The Fisher Note was an unsecured, short-term note with an original maturity at the early of ninety (90) days following the issuance date or upon our receipt of additional litigation financing and an interest rate of 18% per annum. In September 2019, the Fisher Note was amended to time (the “CPIA”extend the maturity date to December 2019 and increase the interest rate to 20% per annum.
On January 15, 2020, we issued 500,000 shares of our Common Stock as repayment of approximately $75,000 in outstanding accounts payable to Stacie Wilf, a related party. The amounts were payable as a result of funds advanced by Ms. Wilf for sales support and advertising costs for our Milo product in 2019.
On February 10, 2020, we entered into a business consulting and retention agreement with Chelsea Investor Relations (“Chelsea”) to provide $2.5 million in additional funding for purposes of advancing our patent assertion program.business advisory services to us. As consideration for services to be provided under the additional investment,24-month term of the consulting agreement, we issued Brickell500,000 shares of unregistered Common Stock in exchange for a nonrefundable retainer for services valued at approximately $150,000.
On February 28, 2020, we issued 1,526,426 shares of our Common Stock as repayment in-kind of approximately $237,000 in principal and accrued interest pursuant to a promissory note with a the Thomas Staz Revocable Trust dated May 15, 2019, as amended (the “Staz Note”). The Staz Note was an unsecured, short-term note with an original maturity at the early of ninety (90) days following the issuance date or upon our receipt of additional litigation financing and an interest rate of 18% per annum. In August 2019, the Staz Note was amended to extend the maturity date to September 2019 and increase the interest rate to 20% per annum. In September 2019, the Staz Note was further amended to extend the maturity date to December 2019. The Staz Note was repaid in Common Stock at an average conversion price of approximately $0.16 per share.
Warrants
On February 28, 2020, we entered into a warrant amendment agreement (the “Warrant Amendment Agreement”) with Aspire Capital Fund, LLC (“Aspire”), with respect to warrants issued in July and September 2018 (the “2018 Warrants”) that are exercisable, collectively, into 5,000,000 shares of our Common Stock. The Warrant Amendment Agreement provided for a reduction in the exercise price for the 2018 Warrants from $0.74 to $0.35 per share and the issuance of a new warrant for the purchase of up to 5,000,000 million shares of our common stockCommon Stock at an exercise price of $0.16$0.74 per share (“New Aspire Warrant”). The New Aspire Warrant expires February 28, 2025 and is subject to adjustment in the event of certain stock dividends and distributions, stock splits, stock combinations, reclassifications or similar events affecting our Common Stock and also upon any distributions of assets to our stockholders. The New Aspire Warrant contains provisions that prohibit exercise if the holder, together with its affiliates, would beneficially own in excess of 9.99% of the number of shares of Common Stock outstanding immediately after giving effect to such exercise. The holder of the New Aspire Warrant may increase (up to 19.99%) or decrease this percentage by providing at least 61 days’ prior notice to the Company. In the event of certain corporate transactions, the holder of the New Aspire Warrant will be entitled to receive, upon exercise of such New Aspire Warrant, the kind and amount of securities, cash or other property that the holder would have received had they exercised the New Aspire Warrant immediately prior to such transaction. The New Aspire Warrant does not contain voting rights or any of the other rights or privileges as a holder of our Common Stock.
We have agreed to include the New Aspire Warrant in this registration statement as permissible and necessary to register under the Exchange Act the resale by Aspire of the shares of Common stock underlying the New Aspire Warrant. The shares underlying the 2018 Warrants are currently registered pursuant to a registration statement on Form S-1 (File No. 333-226738). The Warrant Amendment Agreement added a call provision to the 2018 Warrants whereby we may, after December 31, 2020, call for cancellation of all or any portion of the 2018 Warrants for which an exercise notice has not yet been received, in exchange for consideration equal to $0.001 per warrant share and subject to certain conditions, including the continued existence of an effective registration statement for the underlying shares of Common Stock and the availability of sufficient authorized shares to allow for the exercise of the 2018 Warrants. All other terms of the 2018 Warrants remained unchanged, including the original expiration dates of July and September 2023. In connection with the Warrant Amendment Agreement, Aspire exercised 1,430,000 shares of the 2018 Warrants for aggregate proceeds to us of $500,500.
On March 16, 2020, we entered into an agreement with Tailwinds Research Group LLC (“Tailwinds”) to provide digital marketing services to us. As consideration for services to be provided under the twelve-month term of the agreement, we issued warrants for the purchase up to 200,000 shares of our Common Stock with an exercise price of $1.00 per share. The Warrant isTailwinds warrants are exercisable immediately exercisable, expires five years fromafter issuance, expire March 16, 2023, and are subject to adjustment in the dateevent of issuancecertain stock dividends and includes cashless exercise and registration rights.
distributions, stock splits, stock combinations, reclassifications or similar events affecting our Common Stock.
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To date, we have received an aggregate of $18.0 million from Brickell under the CPIA and have repaid an aggregate of $3.3 million from patent enforcement proceeds. Brickell is entitled to priority payment of 100% of proceeds received from all patent-related actions until such time that Brickell has been repaid its aggregate investment in full. After repayment of its aggregate investment, Brickell is entitled to a portion of remaining proceeds up to a specified minimum return which is determined as a percentage of Brickell’s investment and varies based on the timing of repayment. In addition, Brickell is entitled to a pro rata portion of proceeds from specified legal actions to the extent aggregate proceeds from those actions exceed the specified minimum return. In connection with the December 2018 additional funding, we amended the CPIA to provide Brickell the right to be paid its return as defined under the CPIA in the event we have a change in control transaction. For purposes of calculating the return Brickell is entitled to, the transaction price for the change in control event will be considered proceeds from specific funded legal actions.
Brickell holds a senior security interest in the majority of our assets until such time as the specified minimum return is paid, in which case, the security interest will be released except with respect to the patents and proceeds related to specific legal actions. The security interest is enforceable by Brickell in the event that we are in default under the agreement which would occur if (i) we fail, after notice, to pay proceeds to Brickell, (ii) we become insolvent or insolvency proceedings are commenced (and not subsequently discharged) with respect to us, (iii) our creditors commence actions against us (which are not subsequently discharged) that affect our material assets, (iv) we, without Brickell’s consent, incur indebtedness other than immaterial ordinary course indebtedness, or (v) there is an uncured non-compliance of our obligations or misrepresentations under the agreement. We are currently in compliance with our obligations under this agreement.
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MARKET PRICE OF OUR COMMON STOCK AND RELATED STOCKHOLDER MATTERS
Market Information
OnSince August 17, 2018, our Common Stock was delisted from Nasdaq and began tradinghas been listed on the OTCQB, an over-the-counter market, under the ticker symbol “PRKR”. Over-the-counter market quotations reflect inter-dealer prices, without retail mark-up, mark-down, or commission, and may not necessarily represent actual transactions.
Holders
As of March 25, 2019,6, 2020, we had approximately 4272 holders of record and we believe there are approximately 12,0007,700 beneficial holders of our Common Stock.common stock.
Dividends
We do not currently pay dividends on our Common Stockcommon stock and intend to retain our cash and future earnings, if any, to fund our business plan. OurThe payment of cash dividends in the future dividend policy iswill be dependent upon our revenue and earnings, if any, capital requirements and general financial condition. The payment of any dividends will be within the discretion of our Board and will depend upon various factors, including our business, financial condition, resultsboard of operations and capital requirements.directors.
Equity Plan Information
The following table gives information as of December 31, 20182019 about shares of our common stock authorized for issuance under all of our equity compensation plans (in thousands, except for per share amounts):
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Plan Category | Number of securities to | Weighted-average | Number of securities |
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Equity compensation plans approved by security holders (1) | 860 | $2.23 | 609 |
Equity compensation plans not approved by security holders (2) | 10,550 | 0.17 | 1,450 |
Total | 11,410 |
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1. | Includes the 2000 Performance Equity Plan, the 2008 Equity Incentive Plan, and the 2011 Long-Term Incentive Equity Plan. The types of awards that may be issued under each of these plans is discussed more fully in Note 14 to our audited consolidated financial statements included elsewhere in this prospectus. |
2. | Includes the 2019 Long-Term Incentive Plan. The types of awards that may be issued under each of these plans is discussed more fully in Note 14 to our audited consolidated financial statements included elsewhere in this prospectus. |
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Plan Category | Number of securities to | Weighted-average | Number of securities |
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Equity compensation plans approved by security holders (1) | 1,228 | $7.09 | 317 |
Equity compensation plans not approved by security holders | - | - | - |
Total | 1,228 |
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1 Includes the 2000 Performance Equity Plan, the 2008 Equity Incentive Plan and the 2011 Long-Term Incentive Equity Plan. The types of awards that may be issued under each of these plans is discussed more fully in Note 12 to our consolidated financial statements included elsewhere in this prospectus.
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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Executive Overview
We are in the business of innovating fundamental wireless technologies and products. We have designed and developed proprietary RF technologies and integrated circuits for use in wireless communication products. We have expended significant financial and other resources to research and develop our RF technologies and to obtain patent protection for those technologies in the U.S. and certain foreign jurisdictions. We believe certain patents protecting our proprietary technologies have been broadly infringed by others and therefore our business plan includesprimarily consists of enforcement of our intellectual property rights through patent infringement litigation and licensing efforts. We have also designed and developed a consumer distributed WiFi product line that is beingwas marketed under the brand name Milo.
In August 2018, we implemented cost reduction measures that included a significant reduction in our workforce, the closure of our engineering design center in Lake Mary, Florida and a reduction in executive and management salaries in order to reduce our ongoing operating expenses. As a result of these measures, we ceased ongoing chip development activities and significantly curtailed our spending for development, sales and marketing of our Milo product line in order to focus our limited resources on our patent enforcement program.program, which requires a significant investment over a lengthy period of time. We expect to sell or otherwise exitceased sales of our Milo products during the Milo product operations in the secondfourth quarter of 2019 and intendin order to focus our resources solely on licensing andpatent enforcement of our wireless technologies.actions.
We continue to aggressively pursue licensing opportunities with wireless communications companies that make, use or sell chipsets and/or products that incorporate RF. We believe there are a number of wireless communications companies that can benefit from the use of the RF technologies we have developed, whether through a license or, in certain cases, a joint product venture that may include licensing rights. From time to time, ourOur licensing efforts requireto date have required litigation in order to enforce and/or defend our intellectual property rights. Since 2011, we have been involved in patent infringement litigation against Qualcomm and others for the unauthorized use of our technology. Refer to “Legal Proceedings” in Note 1012 to our consolidated financial statements included elsewhere in this prospectus for a complete discussion of our legal proceedings.
We have expended significant resources since 2011 and incurred significant debt for the enforcement and defense of our intellectual property rights.
Liquidity and Capital Resources
At December 31, 2018,2019, we had a working capital deficit of approximately $2.1$5.5 million, an increase of approximately $1.9 million compared tofrom our working capital deficit of $2.1 million at December 31, 2017. The increase in working capital deficit is largely due to increases in amounts payable to outside litigation firms2018. We had cash and a decrease in the carrying value of our inventory and prepaid assets due to impairment charges associated with our August 2018 restructuring.cash equivalents totaling approximately $0.06 million at December 31, 2019.
We have incurred significant losses from operations and negative cash flows in every year since inception, largely as a result of our significant investments in developing and protecting our intellectual property. For the year ended December 31, 2018,2019, we incurred a net loss of approximately $20.9$9.5 million and had an accumulated deficit of approximately $392.3$401.8 million. Our independent registered public accounting firm has included in their audit report an explanatory paragraph expressing substantial doubt about our ability to continue as a going concern. See Note 2 to our consolidated financial statements included elsewhere in this prospectus for a discussion of our liquidity and our ability to continue as a going concern.
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We used cash for operations of $10.3 million in 2018, representing a $3.8 million, or 27%, decrease from ourOur use of cash for operations has declined 67%, from $10.3 million in 2017.2018 to $3.4 million in 2019. This decrease in cash usage is primarily the result of decreased operating expenses following a decreaserestructuring of our operations in the third quarter of 2018. Although our cash used for legal expenses associated withoperations declined from 2018 to 2019, so did our patent infringement litigation, largely offset by increased cash usage related to inventory expansion and other costs from the development and launchreceipt of our WiFi networking product line.
We have utilized the proceeds from the sale of debt and equity and equity-linked securities and our contingent funding arrangement with Brickellwhich we utilize to fund our operations, including litigation costs.operations. We received net proceeds of approximately $10.6 million and $14.7$3.1 million from equity and debt financings for the years ended December 31,in 2019, compared to $10.6 million received in 2018. The decline in financing proceeds is largely a result of reduced liquidity in our common stock following our delisting from Nasdaq in August 2018 and 2017, respectively, including an aggregatedeclining share price. In addition, we used $1.2 million in cash to repay outstanding debt obligations in 2019, compared to the use of $4.0$0.1 million and $1.0 million, respectively, receivedfor debt repayments in connection with our contingent funding arrangement with Brickell. 2018.
A significant portion of our litigation costs since 2016 have been funded by Brickell. See “Financial Condition” below for a complete discussion of our obligation to Brickell. At December 31, 2018, our aggregate repayment obligation to Brickell was recorded at its estimated fair value of $25.6 million. Although current working capital will not be used to repay this obligation, Brickell is entitled to priority payment of 100% of at least the next $14.7 million in proceeds received by us from any patent-related action. After priority payments to Brickell, any remaining future net proceeds from specific patent enforcement actions will be prorated and prioritized between us, our legal counsel, and Brickell based upon a number of factors including whether the proceeds are a result of a contingently-funded action, the magnitude, nature and timing of the proceeds received, and the contingent percentage agreed to between the parties. Based on our current outstanding legal proceedings, management expects that the contingent fees payable to Brickell and others could range from 25% to 80% of the net proceeds remaining after priority reimbursement to Brickell. These contingent fees are limited to specific actions and are expected to decline following successful completion of our current phase of licensing and patent enforcement activities.
We had cash and cash equivalents totaling approximately $1.5 million at December 31, 2018. In the first quarter of 2019, we received net proceeds of approximately $1.3 million from the issuance of additional convertible debt securities. Although we anticipate a significant decrease in our use of cash for operations in 2019 as a result of our August 2018 cost reduction measures, we expect this decrease to be somewhat offset by increases in our debt repayments. At December 31, 2018, we had approximately $2.4$1.5 million in debt obligations due to be repaid in 2019, an increase2020, a decrease from $0.3$2.4 million in current debt obligations at December 31, 2017. This increase2018. The decrease in our short-term debt repayment obligations is primarily the result of the issuance of$1.2 million in repayments under a secured promissory note, tooffset by new borrowings under unsecured short-term notes payable of $0.2 million. See “Financial Condition” below for a complete discussion of the terms of our litigation counsel in 2018 for unpaid fees and costs related to our patent enforcement program. notes payable.
Our ability to meet our short-term liquidity needs, including our debt repayment obligations, is dependent upon one or more of (i) our ability to successfully negotiate licensing agreements and/or settlements relating to the use of our technologies by others in excess of our contingent payment obligations to Brickell and legal counsel; and/or (ii) our ability to raise additional capital from the sale of equity securities or other financing arrangements.
In the first quarter of 2020, we received net proceeds of approximately $1.6 million from the sale of equity securities and convertible notes and $0.5 million from the exercise of warrants. In addition, we received $0.6 million in advances from a potential litigation funding party. These proceeds are being used to fund our ongoing operations, including litigation costs.
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A significant portion of our litigation costs in 2018 and 2019 have been funded by contingent payment arrangements with legal counsel and a litigation funding arrangement with Brickell. Fee discounts offered by legal counsel in exchange for contingent payments upon successful outcome in our litigation are not recognized in expense until such time that the related proceeds on which the contingent fees are payable are considered probable. Contingent fees vary based on each firm’s specific fee agreement.
In addition to contingent fee arrangements with legal counsel, since 2016, we have received an aggregate of $18 million in funds from Brickell under a contingent funding arrangement. We account for our repayment obligation to Brickell as a long-term debt instrument recorded at its estimated fair value. See “Financial Condition” below for a complete discussion of our obligation to Brickell. At December 31, 2019, our aggregate repayment obligation to Brickell was recorded at its estimated fair value of $26.7 million. Brickell is entitled to a priority prorated payment of at least 55% of proceeds received by us from funded patent-related actions up to a specified minimum return. Brickell’s minimum return varies based on a number of factors including whether the proceeds are a result of a contingently-funded action, the magnitude, nature and timing of the proceeds received, and the contingent percentage agreed to between the parties.
Although current working capital will not be used to repay these contingent arrangements, based on our current outstanding legal proceedings, funding arrangements and contingent payment arrangements, we estimate that 40% to 65% of future proceeds could be payable to others depending on the proceeding and the nature, size and timing of proceeds, among other factors.
Patent enforcement litigation is costly and time-consuming and the outcome is difficult to predict. We expect to continue to invest in the support of our patent enforcement and licensing programs. We expect that revenue generated from patent enforcement actions and/or technology licenses in 2019,2020, if any, after deduction of payment obligations to Brickell and legal counsel, may not be sufficient to cover our operating expenses. In the event we do not generate revenues, or other patent-related proceeds, sufficient to cover our operational costs and contingent repayment obligation, we will be required to raise additional working capital through the sale of equity securities or other financing arrangements.
The long-term continuation of our business plan is dependent upon our ability to secure sufficient financing to support our business, and our ability to generate revenues and/or patent-related proceeds sufficient to offset expenses and meet our contingent payment obligation and other long-term debt repayment obligations. Failure to generate sufficient revenues, raise additional capital through debt or equity financings, and/or reduce operating costs could have a material adverse effect on our ability to meet our short and long-term liquidity needs and achieve our intended long-term business objectives.
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Financial Condition
Intangible Assets
We consider our intellectual property, including patents, patent applications, trademarks, copyrights and trade secrets to be significant to our business. Our intangible assets are pledged as security for our secured contingent payment obligation with Brickell and our secured note payable with our litigation counsel. The net book value of our intangible assets was approximately $3.9$2.9 million and $5.1$3.9 million as of December 31, 20182019 and 2017,2018, respectively. These assets are amortized using the straight-line method over their estimated period of benefit, generally fifteen to twenty years. The decrease in the carrying value of our intangible assets is primarily the result of $1.1$0.6 million in patent amortization expense recognized in 2018 combined with minimal cost additions to our intangible assets2019 as our portfolio matures.matures and a $0.4 million loss on abandonment of certain patents and patent applications. Management evaluates the recoverability of intangible assets periodically and takes into account events or circumstances that may warrant revised estimates of useful lives or that may indicate impairment exists. As part of our ongoing patent maintenance program, we may, from time to time, abandon a particular patent if we determine fees to maintain the patent exceed its expected recoverability. For each of the years ended December 31, 20182019 and 2017,2018, we incurred losses of approximately $0.4 million and $0.1 million, respectively, for the write off of specific patent assets. These losses are included in operating expenses in the accompanying consolidated statements of comprehensive loss.
Secured Contingent Payment Obligation
Our secured contingent payment obligation to Brickell was recorded at its estimated fair value of $25.6$26.7 million and $15.9$25.6 million as of December 31, 2019 and 2018, and 2017, respectively, representing an increase of approximately $9.7 million. This increase is the result of a $4.0 million increase from additional proceeds received from Brickell in 2018 and a $5.7 million increase in the estimated fair value of our repayment obligation to Brickell.respectively. Under the funding agreement, Brickell has a right to reimbursement and compensation from gross proceeds resulting from patent enforcement and other patent monetization actions on a priority basis. Our repayment obligation to Brickell is contingent upon receipt of proceeds from our patents and the amount of our obligation varies based on the magnitude, timing and nature of proceeds received by us. As a result, we have elected to account for this obligation at its estimated fair value which is subject to significant estimates and assumptions as discussed in “Critical Accounting Policies” below. The $5.7$1.1 million increase in estimated fair value of this repayment obligation in 20182019 is primarily the result of (i) additional proceeds received in 2018, (ii) increases in the estimated time frames for repayment ofminimum return due to Brickell the longer the obligation remains outstanding and (iii)(ii) changes in our estimated probabilities for the timing and amount of future repayments to Brickell. Refer to Note 810 to our consolidated financial statements included elsewhere in this prospectus for a discussion of the fair value measurement of our contingent payment obligation.
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Brickell is entitled to a priority payment of 100% of at least the next $14.7 million in proceeds received by us from any patent-related action. Thereafter, Brickell is entitled to a portion of additional patent-related proceeds up to at least a specified minimum return which is determined as a percentage of the funded amount and varies based on the timing of repayment. In addition, Brickell is entitled to a pro rata portion of proceeds from specified legal actions to the extent aggregate proceeds from those actions exceed the specified minimum return. In the event of a change in control of the Company, Brickell has the right to be paid its return as defined under the agreement based on the transaction price for the change in control event.
Brickell holds a senior security interest in the majority of our assets until such time as the specified minimum return is paid, in which case, the security interest will be released except with respect to the patents and proceeds related to specific legal actions. The security interest is enforceable by Brickell in the event that we are in default under the agreement. We are currently in compliance with the provisions of the agreement.
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We received no proceeds from Brickell in 2019. In 2018, we received aggregate proceeds of $4.0 million from Brickell including proceeds of $2.5 million received in December 2018. The December 2018 funding was critical to meet our ongoing obligations, particularly with regard to our litigation fees and expenses and therefore, in connection with the transaction, we issued Brickell a warrant to purchase up to 5.0 million shares of our common stock at an exercise price of $0.16 per share. As the estimated fair value of the payment obligation to Brickell resulting from this additional funding exceeded the $2.5 million in proceeds received, no value was assigned to the warrants.
Notes Payable
As of December 31, 2018,2019, we had approximately $3.2$2.3 million in notes payable, including an unsecured promissory note payable to Sterne, Kessler, Goldstein, & Fox, PLLC (“SKGF”SKGF”), a related party, of approximately $0.8$0.9 million, and a secured promissory note payable to Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. (“Mintz”Mintz”) of $2.4$1.2 million, and short-term bridge loans from accredited investors of approximately $0.2 million. The short-term bridge loans were repaid in the first quarter of 2020 with shares of our common stock (see Note 18).
Failure to comply with the payment terms of each of these notes constitutes an event of default which, if uncured, will result in the entire unpaid principal balance of the note and any unpaid, accrued interest to become immediately due and payable. In addition, an event of default results in an increase in the interest rate under the SKGF and Mintz notes to a default rate of 12% per annum. As of December 31, 2018,2019, we wereare in default of the payment provisions of the secured note payable to Mintz and we are in dispute with Mintz regarding fees billed. We are actively working with Mintz to resolve the dispute and cure any default. There can be no assurance that we will be successful in curing our default on the payment terms of these notes. Mintz waived past and future payment defaults under the notes through at least May 31, 2019, including waiver of the acceleration and increased interest provisions of the note for the same period.
In March 2019, we amended the note payable to SKGF to provide for a waiver of the payment default, a decrease in the interest rate from 8% to 4% per year, an extension of the maturity date from March 2020 to April 2022, and a reduction in the monthly payment. As a result of this amendment, approximately $0.65 million of our obligation to SKGF was reclassified from current to long-term liabilities as of December 31, 2018. note.
Deferred Tax Assets and Related Valuation Allowance
Deferred tax assets and liabilities are recognized for the expected future tax consequences of events that have been included in the financial statements or tax returns. Deferred tax assets and liabilities are determined based on differences between the financial statement carrying amounts and the tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Valuation allowances are established to reduce deferred tax assets when, based on available objective evidence, it is more likely than not that the benefit of such assets will not be realized. As of December 31, 2018,2019, we had net deferred tax assets of approximately $98$96 million, primarily related to our net operating lossNOL carryforwards, which were fully offset by a valuation allowance due to the uncertainty related to realization of these assets through future taxable income. In addition, our ability to benefit from our net operating lossNOL and other tax credit carryforwards could be limited under Section 382 of the Internal Revenue Code as more fully discussed in Note 911 to our consolidated financial statements included elsewhere in this prospectus.
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Results of Operations for Each of the Years Ended December 31, 20182019 and 20172018
We use both generally accepted accounting principles (“GAAP”) and non-GAAP financial measures for assessing our consolidated results of operations. The non-GAAP measures we use include Adjusted Net Loss and Adjusted Net Loss per Share. These non-GAAP measures exclude the effect on net loss and net loss per share of (i) changes in fair value of our secured contingent payment obligation and (ii) share-based compensation expense. Share-based compensation is a non-cash expense item that is subject to significant fluctuation in value based on the volatility of the market price of our common stock, and the expense recognized on a GAAP basis is not necessarily indicative of the compensation realized by our executives, employees and non-employee directors. The change in fair value of our secured contingent payment obligation is subject to significant estimates and assumptions regarding future events and, similar to interest on long-term debt obligations, is a reflection of our cost of financing rather than our operating activities. Accordingly, we consider these non-GAAP measures to provide relevant supplemental information to assist investors in better understanding our operating results. These non-GAAP measures should not be considered a substitute for, or superior to measures of financial performance prepared in accordance with GAAP.
Refer to “Reconciliation of Non-GAAP Financial Measures” in this section for a reconciliation of these non-GAAP financial measures to the most directly comparable GAAP measures for the years ended December 31, 2018 and 2017.
RevenuesSecured Contingent Payment Obligation
Our secured contingent payment obligation to Brickell was recorded at its estimated fair value of $26.7 million and Gross Margins$25.6 million as of December 31, 2019 and 2018, respectively. Under the funding agreement, Brickell has a right to reimbursement and compensation from gross proceeds resulting from patent enforcement and other patent monetization actions on a priority basis. Our repayment obligation to Brickell is contingent upon receipt of proceeds from our patents and the amount of our obligation varies based on the magnitude, timing and nature of proceeds received by us. As a result, we have elected to account for this obligation at its estimated fair value which is subject to significant estimates and assumptions as discussed in “Critical Accounting Policies” below. The $1.1 million increase in estimated fair value of this repayment obligation in 2019 is primarily the result of (i) increases in the minimum return due to Brickell the longer the obligation remains outstanding and (ii) changes in our estimated probabilities for the timing and amount of future repayments to Brickell. Refer to Note 10 to our consolidated financial statements included elsewhere in this prospectus for a discussion of the fair value measurement of our contingent payment obligation.
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Brickell is entitled to a priority payment of patent-related proceeds up to at least a specified minimum return which is determined as a percentage of the funded amount and varies based on the timing of repayment. In addition, Brickell is entitled to a pro rata portion of proceeds from specified legal actions to the extent aggregate proceeds from those actions exceed the specified minimum return. In the event of a change in control of the Company, Brickell has the right to be paid its return as defined under the agreement based on the transaction price for the change in control event.
Brickell holds a senior security interest in the majority of our assets until such time as the specified minimum return is paid, in which case, the security interest will be released except with respect to the patents and proceeds related to specific legal actions. The security interest is enforceable by Brickell in the event that we are in default under the agreement. We are currently in compliance with the provisions of the agreement.
We reportedreceived no licensing revenue forproceeds from Brickell in 2019. In 2018, we received aggregate proceeds of $4.0 million from Brickell including proceeds of $2.5 million received in December 2018. The December 2018 funding was critical to meet our ongoing obligations, particularly with regard to our litigation fees and expenses and therefore, in connection with the years endedtransaction, we issued Brickell a warrant to purchase up to 5.0 million shares of our common stock at an exercise price of $0.16 per share. As the estimated fair value of the payment obligation to Brickell resulting from this additional funding exceeded the $2.5 million in proceeds received, no value was assigned to the warrants.
Notes Payable
As of December 31, 2018 or 2017. Although2019, we do anticipate licensing revenue and/or settlement gainshad approximately $2.3 million in notes payable, including an unsecured promissory note payable to Sterne, Kessler, Goldstein, & Fox, PLLC (“SKGF”), a related party, of approximately $0.9 million, a secured promissory note payable to Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. (“Mintz”) of $1.2 million, and short-term bridge loans from accredited investors of approximately $0.2 million. The short-term bridge loans were repaid in the first quarter of 2020 with shares of our common stock (see Note 18).
Failure to comply with the payment terms of each of these notes constitutes an event of default which, if uncured, will result from our licensingin the entire unpaid principal balance of the note and patent enforcement actions,any unpaid, accrued interest to become immediately due and payable. In addition, an event of default results in an increase in the amountinterest rate under the SKGF and timing is highly unpredictableMintz notes to a default rate of 12% per annum. As of December 31, 2019, we are in default of the payment provisions of the secured note payable to Mintz and therewe are in dispute with Mintz regarding fees billed. We are actively working with Mintz to resolve the dispute and cure any default. There can be no assurance that we will achievebe successful in curing our anticipated results. default on the Mintz note.
We reported product revenue of $0.1 million for each of the years ended December 31, 2018Deferred Tax Assets and 2017, respectively, from the sales of our Milo-branded products. Our gross margins on Milo product sales, before impairment charges, were approximately 24%Related Valuation Allowance
Deferred tax assets and 25%liabilities are recognized for the years ended December 31, 2018expected future tax consequences of events that have been included in the financial statements or tax returns. Deferred tax assets and 2017, respectively. Our revenues from Milo products to date have fallen shortliabilities are determined based on differences between the financial statement carrying amounts and the tax bases of our projections,assets and we have limited resources to deploy towards increasing consumer awareness of our products. As a result,liabilities using enacted tax rates in effect for the year endedin which the differences are expected to reverse. Valuation allowances are established to reduce deferred tax assets when, based on available objective evidence, it is more likely than not that the benefit of such assets will not be realized. As of December 31, 2018,2019, we recorded $1.1 million in impairment charges to reduce excess inventories to their estimatedhad net realizable value. For the year ended December 31, 2017, we recognized approximately $0.1 million in impairment charges related to excess inventory of our integrated circuits.
Research and Development Expenses
Research and development expenses consist primarily of engineering and related management and support personnel costs; fees for outside engineering design services which we use from time to time to supplement our internal resources; depreciation expenses related to certaindeferred tax assets used in product development; prototype production and materials costs for both chips and end-user products; software licensing and support costs, which represent the annual licensing and support maintenance for engineering design and other software tools; and rent and other overhead costs for our engineering design facility. Personnel costs include share-based compensation which represents the grant date fair value of equity-based awards to our employees which is attributed to expense over the service period of the award.
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Research and development costs were approximately $2.9 million for the year ended December 31, 2018 compared to approximately $4.3 million for the year ended December 31, 2017, representing a decrease of approximately $1.4 million, or 33%. This decrease is primarily the result of a $0.9 million decrease in personnel and related costs, including a $0.4 million decrease in share-based compensation expense, a $0.4 million decrease in costs related to chip design and fabrication, a $0.1 million decrease in software licensing and support costs, and a $0.1 million decrease in facilities and related costs, offset by a $0.2 million increase in outside consulting services.
The decreases in personnel, chip fabrication, software and licensing, and facilities costs are all a result of the August 2018 restructuring of operations which included a significant workforce reduction, reduction in engineering executive compensation, and closure of the Lake Mary engineering design facility. Share-based compensation decreased as a result of decreases in the value of current awards when compared to previous awards as a result of the declining price of our common stock, longer vesting periods for new awards, and forfeiture of awards in connection with our restructuring. The increase in outside consulting services is a result of resources utilized in connection with Milo product development. These outside services are not expected to continue in 2019.
We anticipate that our research and development expenses will decrease further in 2019 as our focus will be on providing technical support to the patent enforcement and licensing activities for our patent portfolio with limited resources dedicated to further expansion of our technologies and patents.
Selling, General, and Administrative Expenses
Selling, general and administrative expenses consist primarily of executive, director, sales and marketing, and finance and administrative personnel costs, including share-based compensation, costs incurred for advertising, insurance, shareholder relations and outside legal and professional services, including litigation expenses, and amortization and maintenance expenses related to our patent assets.
Our selling, general and administrative expenses were approximately $10.4 million for the year ended December 31, 2018, as compared to approximately $14.1 million for the year ended December 31, 2017, representing a decrease of approximately $3.7 million or 26%. This decrease is the result of a decrease in litigation fees and expenses of approximately $1.5 million, a decrease in outside consulting fees of approximately $1.4 million, a decrease in share-based compensation expense of approximately $0.8 million, and a decrease in other personnel costs, including travel costs, of approximately $0.2 million, somewhat offset by an increase in advertising expense of approximately $0.3 million.
The decrease in litigation fees and expenses is primarily the result of fees and expenses incurred in 2017 related to the ITC action that was terminated in March 2017. Consulting fees decreased as a result of a reduction in the use of outside professionals for marketing, shareholder relations and business advisory activities in 2018. The decrease in marketing consulting fees for the Milo product launch was somewhat offset by an increase in Milo advertising expense as various marketing campaigns were launched in 2018.
The decrease in share-based compensation is due to decreases in the value of current awards when compared to previous awards as a result of the declining price of our common stock, longer vesting periods for new awards, and forfeiture of awards. Personnel costs decreased as a result of reductions in executive management salaries and a reduction in marketing, sales and administrative personnel as a part of our August 2018 restructuring, somewhat offset by personnel additions in mid to late 2017 to support the Milo product operations.
Restructuring Charges
We incurred approximately $0.7 million in restructuring charges in 2018. These charges are a result of the implementation of cost reduction measures in August 2018 that included a significant reduction in our workforce, the closure of our engineering design center in Lake Mary, Florida, the cessation of ongoing chip development activities, and a significant reduction in our spending for sales and marketing of our
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Milo product line. These measures were undertaken in order to focus our limited resources toward our patent enforcement program which, if successful, has the ability to generate significant licensing and/or settlement revenue. The restructuring charges were primarily related to one-time termination benefits, the impairment of prepaid assets, and our estimated future lease obligation for our Lake Mary, Florida facility, net of estimated sublease income. At December 31, 2018, we recorded an estimated lease obligation for our Lake Mary facility of approximately $0.2 million which is net of an estimated $0.4 million in future sublease rental income. We are actively marketing the Lake Mary facility for sublease, however there can be no assurance that our efforts will be successful. If we are unable to sublet our Lake Mary facility for the rental amount or term that we have estimated, we will incur additional impairment charges related to this lease obligation. In addition, we may incur restructuring charges in 2019 related to the disposition of our Milo product operations.
As a result of our restructuring, we estimate that we will recognize annualized savings of approximately $9$96 million, primarily related to reduced personnel, outside marketing consulting and advertising costsour NOL carryforwards, which were fully offset by a valuation allowance due to the uncertainty related to product marketing, facilities costs,realization of these assets through future taxable income. In addition, our ability to benefit from our NOL and board and executive compensation.
Changeother tax credit carryforwards could be limited under Section 382 as more fully discussed in Fair Value of Contingent Payment Obligation
Our losses from the changes in fair value of our contingent payment obligation were approximately $5.7 million and $0.7 million for the years ended December 31, 2018 and 2017, respectively. See “Financial Condition” above for a discussion of our contingent payment obligation and the factors impacting the change in fair value.
Adjusted Net Loss and Adjusted Net Loss per Share
Adjusted net loss decreased by approximately $2.2 million, or 14%, for the year ended December 31, 2018 comparedNote 11 to the same period in 2017. The decrease in adjusted net loss is a result of the decrease in litigation expenses as well as a decrease in operating expenses as a result of our restructuring. On a per share basis, our adjusted net loss per common share decreased by $0.35 per share, or 38%. This decrease is primarily the result of a 38% increase in our weighted average common shares outstanding along with the decrease in our adjusted net loss.
Reconciliation of Non-GAAP Financial Measures
The following table presents a reconciliation of our net loss to the non-GAAP measure of adjusted net loss for the years ended December 31, 2018 and 2017, respectively:
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|
|
|
|
|
|
|
|
|
|
|
|
(in thousands) |
| 2018 |
| 2017 | ||
Net loss |
| $ | (20,869) |
| $ | (19,259) |
Excluded items: |
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|
|
|
|
|
Share-based compensation |
|
| 1,050 |
|
| 2,164 |
Change in fair value of contingent payment obligation |
|
| 5,661 |
|
| 711 |
Adjusted net loss |
| $ | (14,158) |
| $ | (16,384) |
|
|
|
|
|
|
|
The following table presents a reconciliation of our net loss per common share to the non-GAAP measure of adjusted net loss per common share for the years ended December 31, 2018 and 2017, respectively:
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|
|
|
|
|
|
|
|
|
|
|
|
| 2018 |
| 2017 | ||
Basic and diluted net loss per common share |
| $ | (0.85) |
| $ | (1.09) |
Excluded items |
|
| 0.27 |
|
| 0.16 |
Adjusted net loss per common share |
| $ | (0.58) |
| $ | (0.93) |
|
|
|
|
|
|
|
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Critical Accounting Policies
We believe that the following are critical accounting policies and estimates that significantly impact the preparation of our consolidated financial statements:statements included elsewhere in this prospectus.
Inventory
Inventory is stated atResults of Operations for Each of the lower of actual cost, as determined under the first-in, first-out method, or estimated net realizable value. We review our inventory for estimated obsolescence or unmarketable inventory and write down inventory for the difference between cost and estimated market value based upon assumptions about future demand. Future demand is affected by market conditions, technological obsolescence, new products and strategic plans, each of which is subject to change. During the years endedYears Ended December 31, 20182019 and 2017, we recorded $1.1 million and $0.1 million, respectively, for impairment charges to reduce excess inventories to their estimated net realizable value.2018
Secured Contingent Payment Obligation
Our secured contingent payment obligation to Brickell was recorded at its estimated fair value of $26.7 million and $25.6 million as of December 31, 2019 and 2018, respectively. Under the funding agreement, Brickell has a right to reimbursement and compensation from gross proceeds resulting from patent enforcement and other patent monetization actions on a priority basis. Our repayment obligation to Brickell is contingent upon receipt of proceeds from our patents and the amount of our obligation varies based on the magnitude, timing and nature of proceeds received by us. As a result, we have elected to account for this obligation at its estimated fair value which is subject to significant estimates and assumptions as discussed in “Critical Accounting Policies” below. The $1.1 million increase in estimated fair value of this repayment obligation in 2019 is primarily the result of (i) increases in the minimum return due to Brickell the longer the obligation remains outstanding and (ii) changes in our estimated probabilities for the timing and amount of future repayments to Brickell. Refer to Note 10 to our consolidated financial statements included elsewhere in this prospectus for a discussion of the fair value measurement of our contingent payment obligation.
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Brickell is entitled to a priority payment of patent-related proceeds up to at least a specified minimum return which is determined as a percentage of the funded amount and varies based on the timing of repayment. In addition, Brickell is entitled to a pro rata portion of proceeds from specified legal actions to the extent aggregate proceeds from those actions exceed the specified minimum return. In the event of a change in control of the Company, Brickell has the right to be paid its return as defined under the agreement based on the transaction price for the change in control event.
Brickell holds a senior security interest in the majority of our assets until such time as the specified minimum return is paid, in which case, the security interest will be released except with respect to the patents and proceeds related to specific legal actions. The security interest is enforceable by Brickell in the event that we are in default under the agreement. We are currently in compliance with the provisions of the agreement.
We received no proceeds from Brickell in 2019. In 2018, we received aggregate proceeds of $4.0 million from Brickell including proceeds of $2.5 million received in December 2018. The December 2018 funding was critical to meet our ongoing obligations, particularly with regard to our litigation fees and expenses and therefore, in connection with the transaction, we issued Brickell a warrant to purchase up to 5.0 million shares of our common stock at an exercise price of $0.16 per share. As the estimated fair value of the payment obligation to Brickell resulting from this additional funding exceeded the $2.5 million in proceeds received, no value was assigned to the warrants.
Notes Payable
As of December 31, 2019, we had approximately $2.3 million in notes payable, including an unsecured promissory note payable to Sterne, Kessler, Goldstein, & Fox, PLLC (“SKGF”), a related party, of approximately $0.9 million, a secured promissory note payable to Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. (“Mintz”) of $1.2 million, and short-term bridge loans from accredited investors of approximately $0.2 million. The short-term bridge loans were repaid in the first quarter of 2020 with shares of our common stock (see Note 18).
Failure to comply with the payment terms of each of these notes constitutes an event of default which, if uncured, will result in the entire unpaid principal balance of the note and any unpaid, accrued interest to become immediately due and payable. In addition, an event of default results in an increase in the interest rate under the SKGF and Mintz notes to a default rate of 12% per annum. As of December 31, 2019, we are in default of the payment provisions of the secured note payable to Mintz and we are in dispute with Mintz regarding fees billed. We are actively working with Mintz to resolve the dispute and cure any default. There can be no assurance that we will be successful in curing our default on the Mintz note.
Deferred Tax Assets and Related Valuation Allowance
Deferred tax assets and liabilities are recognized for the expected future tax consequences of events that have been included in the financial statements or tax returns. Deferred tax assets and liabilities are determined based on differences between the financial statement carrying amounts and the tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Valuation allowances are established to reduce deferred tax assets when, based on available objective evidence, it is more likely than not that the benefit of such assets will not be realized. As of December 31, 2019, we had net deferred tax assets of approximately $96 million, primarily related to our NOL carryforwards, which were fully offset by a valuation allowance due to the uncertainty related to realization of these assets through future taxable income. In addition, our ability to benefit from our NOL and other tax credit carryforwards could be limited under Section 382 as more fully discussed in Note 11 to our consolidated financial statements included elsewhere in this prospectus.
Results of Operations for Each of the Years Ended December 31, 2019 and 2018
Revenues and Gross Margins
We reported no licensing revenue for the years ended December 31, 2019 or 2018. Although we do anticipate licensing revenue and/or settlement gains to result from our licensing and patent enforcement actions, the amount and timing is highly unpredictable and there can be no assurance that we will achieve our anticipated results.
We reported product revenue of $0.07 million and $0.14 million for the years ended December 31, 2019 and 2018, respectively, from the sales of our Milo-branded products. Our product revenue declined due to overall reductions in development, sales and marketing for these products following our 2018 restructuring.
The gross margins on Milo product sales, before inventory impairment charges, were approximately 1% and 24% for the years ended December 31, 2019 and 2018, respectively. The decrease in gross margin is the result of sales price adjustments in 2019. Our revenues from Milo products fell short of our projections and we had limited resources to deploy towards increasing consumer awareness of our products. As a result, we made the decision to discontinue sales of Milo products during the fourth quarter of 2019. Additionally, during the year ended December 31, 2018, we recorded $1.1 million in impairment charges to reduce excess inventories to their estimated net realizable value.
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Research and Development Expenses
Research and development expenses consist primarily of engineering and related management and support personnel costs; fees for outside engineering design services which we use from time to time to supplement our internal resources; depreciation expenses related to certain assets used in product development; prototype production and materials costs for both chips and end-user products; software licensing and support costs, which represent the annual licensing and support maintenance for engineering design and other software tools; and rent and other overhead costs for our engineering design facility. Personnel costs include share-based compensation which represents the grant date fair value of equity-based awards to our employees which is attributed to expense over the service period of the award. Subsequent to March 31, 2019, we halted substantially all research and development efforts and, where applicable, repurposed prior engineering resources to support our patent enforcement programs or our Milo sales and support.
Research and development costs were approximately $0.3 million for the year ended December 31, 2019 compared to approximately $2.9 million for the year ended December 31, 2018, representing a decrease of approximately $2.6 million, or 90%. This decrease is primarily the result of a $1.3 million decrease in personnel and related costs, a $0.3 million decrease in consulting fees, and a $0.1 million decrease in software licensing and support costs. Additionally, research and development expenses decreased approximately $0.6 million due to personnel and related costs being repurposed for selling, general and administrative purposes including litigation support and Milo sales and support.
The decreases in personnel and software and licensing are a result of the August 2018 restructuring of operations which included a significant workforce reduction, reduction in engineering executive compensation, and closure of the Lake Mary engineering design facility. The reduction in outside consulting services is the result of cost reduction efforts pertaining to our Milo product operations and integrated circuit development following our 2018 restructuring.
Selling, General, and Administrative Expenses
Selling, general and administrative expenses consist primarily of executive, director, sales and marketing, and finance and administrative personnel costs, including share-based compensation, costs incurred for advertising, insurance, shareholder relations and outside legal and professional services, including litigation expenses, and amortization and maintenance expenses related to our patent assets.
Our selling, general and administrative expenses were approximately $7.6 million for the year ended December 31, 2019, as compared to approximately $10.4 million for the year ended December 31, 2018, representing a decrease of approximately $2.8 million or 27%. This is primarily due to a $0.9 million decrease in personnel and related expense, including a decrease in share-based compensation expense of approximately $0.2 million, a decrease in Milo product advertising costs of approximately $0.6 million, a decrease in marketing and other business consulting and legal fees of approximately $0.7 million, a decrease in noncash amortization expense of approximately $0.4 million, a decrease in board compensation of approximately $0.2 million and a decrease in travel expenses and shareholder relations costs of approximately $0.1 million each. These decreases are somewhat offset by an increase in losses on disposals of patent and other long-lived assets of approximately $0.3 million.
The decrease in personnel costs is primarily the result of the reduction in personnel and executive compensation as part of our 2018 restructuring, somewhat offset by the repurposing of technical personnel for litigation support commencing in the second quarter of 2019. Share-based compensation expense decreased primarily as a result of lower grant-date fair values on newer awards due to declining stock prices when compared to prior year awards.
The decreases in product advertising and marketing, consulting and legal fees, board compensation, shareholder relations costs and travel expenses are a result of our cost reduction measures that commenced in 2018. The decrease in noncash amortization expense is the result of the expiration and/or abandonment of a number of our patents and patent applications since the third quarter of 2018.
Restructuring Charges
We incurred approximately $0.7 million in restructuring charges in 2018. These charges are a result of the implementation of cost reduction measures in August 2018 that included a significant reduction in our workforce, the closure of our engineering design center in Lake Mary, Florida, the cessation of ongoing chip development activities, and a significant reduction in our spending for sales and marketing of our Milo product line. These measures were undertaken in order to focus our limited resources toward our patent enforcement program which, if successful, has the ability to generate significant licensing and/or settlement revenue. The restructuring charges were primarily related to one-time termination benefits, the impairment of prepaid assets, and our estimated future lease obligation for our Lake Mary, Florida facility, net of estimated sublease income. At December 31, 2018, we recorded an estimated lease obligation for our Lake Mary facility of approximately $0.2 million which is net of an estimated $0.4 million in future sublease rental income. To date, we have not sublet this facility. We are actively marketing the Lake Mary facility for sublease, however there can be no assurance that our efforts will be successful. If we are unable to sublet our Lake Mary facility for the rental amount or term that we have estimated, we will incur additional impairment charges related to this lease obligation.
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The 2018 cost reduction measures have resulted in significant cost savings in 2019.
Change in Fair Value of Contingent Payment Obligation
Our losses from the changes in fair value of our contingent payment obligation were approximately $1.1 million and $5.7 million for the years ended December 31, 2019 and 2018, respectively. See “Financial Condition” above for a discussion of our contingent payment obligation and the factors impacting the change in fair value.
Critical Accounting Policies
We believe that the following are critical accounting policies and estimates that significantly impact the preparation of our consolidated financial statements:
Inventory
Inventory is stated at the lower of actual cost, as determined under the first-in, first-out method, or estimated net realizable value. We review our inventory for estimated obsolescence or unmarketable inventory and write down inventory for the difference between cost and estimated market value based upon assumptions about future demand. Future demand is affected by market conditions, technological obsolescence, new products and strategic plans, each of which is subject to change.
Secured Contingent Payment Obligation
We have accounted for our secured contingent repayment obligation as long-term debt. Our repayment obligation is contingent upon the receipt of proceeds from patent enforcement or other patent monetization actions. We have elected to measure our secured contingent payment obligation at its estimated fair value based on the variable and contingent nature of the repayment provisions. We have determined that the fair value of our secured contingent payment obligation falls within Level 3 in the fair value hierarchy which involves significant estimates and assumptions including projected future patent-related proceeds and the risk-adjusted rate for discounting future cash flows. Actual results could differ from the estimates made. Changes in fair value, including the component related to imputed interest, are included in the consolidated statements of comprehensive loss under the heading “Change in fair value of contingent payment obligation.” Refer to Note 810 to our consolidated financial statements included elsewhere in this prospectus for a discussion of the significant estimates and assumptions used in estimated the fair value of our contingent payment obligation.
Accounting for Share-Based Compensation
We calculate the fair value of share-based equity awards to employees, including restricted stock, stock options and restricted stock units (“RSUs”RSUs”), on the date of grant and recognize the calculated fair value as compensation expense over the requisite service periods of the related awards. The fair value of stock option awards is determined using the Black-Scholes option valuation model which requires the use of highly subjective assumptions and estimates including how long employees will retain their stock options before exercising them and the volatility of our common stock price over the expected life of the equity award. Changes in these subjective assumptions can materially affect the estimate of fair value of share-based compensation and consequently, the related amount recognized as expense in the consolidated statements of comprehensive loss.
New Accounting Pronouncement - LeasesPronouncements
Our facilities are leased under operating leases. EffectiveAs of January 1, 2019, we will adoptadopted Accounting Standards Codification (“ASC”) 842, “Leases” which“Leases.” ASC 842 requires the recognition of right-to-uselessees to recognize right-of-use (“ROU”) assets and lease liabilities on the balance sheet for any financing orall finance and operating leases with lease terms of more than one year. The new guidance also increases disclosure of12 months and disclose key information about leasing arrangements. Aarrangements (see Note 8). ASC 842 allows for the application of the new standard on the adoption date without restatement of prior comparative periods or a modified retrospective transition approach is required for adoption, applyingmethod which requires application of the new standard to all leases existing at the beginning of the earliest period presented. We have elected to use the adoption date as the initial application date without restatement of initial application. The new standard provides a number of practical expedients in transition which permits us not to reassess under the new standard our prior conclusions about lease identification, lease classification and treatment of initial direct costs.comparative periods. We intend to electalso elected the package of practical expedients in transition, and we have elected to use the effective date of adoption as the date of initial application of this new standard. Consequently, financial information will not be updated and the disclosures requiredpermitted under the new standard willtransition guidance which, among other things, does not be provided for dates and periods priorrequire us to January 1, 2019. We expect thereassess lease classification. Upon adoption of this new standardASC 842, we recognized an adjustment to resultbeginning retained earnings of approximately $0.04 million for the cumulative effect of the change in the recognitionaccounting principle. We also recorded a ROU asset of operating lease right-to-use assetsapproximately $0.56 million and an increase in our operating lease liabilities of approximately $0.56$0.60 million, and $0.61 million, respectively, primarily related to operating leases for our facilities leases. In addition,office and warehouse facilities. Our accounting for finance leases remains substantially unchanged. Adoption of the standard did not materially impact operating results or cash flows.
As of January 1, 2019, we adopted Accounting Standards Update (“ASU”) 2018-02, “Income Statement - Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income.” The amendments in this update allow a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act. We have no stranded tax effects included in our other comprehensive loss and therefore the adoption of the new standard will result in significant new disclosures aboutASU 2018-02 did not impact our leasing activities. consolidated financial statements.
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As of January 1, 2019, we adopted ASU 2018-07, "Compensation - Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting." The amendments in this update simplify the accounting for share-based payments to nonemployees by aligning it with the accounting for share-based payments to employees, with certain exceptions. We did not previously have awards to nonemployees that would require reassessment and therefore the adoption of ASU 2018-07 did not impact our consolidated financial statements.
Off-Balance Sheet Transactions
As of December 31, 2018,2019, we had outstanding warrants to purchase 13.312.2 million shares of our common stock. The estimated grant date fair value of these warrants of approximately $1.8$1.3 million is included in shareholders’ deficit in our consolidated balance sheet for the year ended December 31, 2018.2019. The outstanding warrants have an average exercise price of $0.39$0.44 per share and a weighted average remaining life of approximately five4 years.
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We were incorporated under the laws of the state of Florida on August 22, 1989. We are in the business of innovating fundamental wireless technologies and products. We have designed and developed proprietary radio frequency (“RF”) technologies and integrated circuits for use in wireless communication products. We have also designed and developed a consumer distributed WiFi product line that is marketed under the brand name Milo®.
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 our business plan includes 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 mobile handset providers and their chip suppliers for the infringement of a number of our RF patents.
We have also designed and developed a consumer distributed WiFi product line that is marketed underrestructured our operations during the brand name Milo®. We expectthird quarter of 2018 in order to sell or otherwise exitreduce operating expenses in light of our limited capital resources. Accordingly, we significantly reduced our ongoing investment in the Milo product operationsand ceased our integrated circuit development efforts. In early 2019, we ceased substantially all ongoing research and development efforts and, where applicable, repurposed resources to support our patent enforcement and product sales and support efforts. We ceased sales of our Milo products in the secondfourth quarter of 2019 and intend to focus our resources solely on licensing and enforcement of our wireless technologies.2019.
General Development of Business
Our business has been primarily focused on the development, marketing and licensing of our RF technologies for mobile and other wireless products and applications, including our own internally developed end-user wireless products. For a number of years, we marketed our RF technologies and integrated circuit products for use in mobile products and applications. Our lack of tenure in the mobile handset industry coupled with the unique nature of our technology resulted in lengthy and intense technology evaluation and due diligence efforts by potential customers. Furthermore, in order to utilize our technology in a mobile handset application, we were reliant upon the provider of the baseband processor that generates the data to be transmitted or received by our RF chipsets. Although our technology is capable of interfacing with any baseband processor, the development of the interface between the baseband processor and our chipset requires a cooperative effort with the baseband provider. Accordingly, our marketing efforts were dependent on the activities of third parties. In 2011, through analysis of conference papers and tear down reports, we concluded that Qualcomm’s products were infringing our energy transfer sampling down conversion technology. Based on our belief that our technology is widely-deployed in the mobile handset market as a result of infringement of our patents, we began to more vigorously pursue an intellectual property licensing strategy which included enforcement actions.
From 2014 through 2017, we pursued licensing opportunities for our technologies, including through additional litigation where we deemed necessary to protect our patent rights. In addition to our patent enforcement activities, from 2013 through 2017, we also designed and developed products that included integrated circuits (“ICs”) based on our proprietary technologies as well end-user WiFi products aimed at the home and small business networking market. These product development efforts culminated in the launch of our Milo brand product line, which began selling in October 2017.
During the first half of 2018, we focused on (i) production, sales and marketing, and continued developments and enhancements of our WiFi products; (ii) ongoing integrated circuit development for future products and (iii) supporting our patent enforcement and licensing efforts. Our WiFi products did not produce the revenue growth that we had anticipated in 2018 and we also experienced lengthy delays in proceedings in certain of our patent enforcement efforts.
In addition, trading of our common stockon the Capital Market of The Nasdaq Stock Market LLC (“Nasdaq”) was suspended effective at the open of business on August 17, 2018 as a result of our failure to maintain at least $35 million in market value of listed securities. Our common stock began trading on the OTCQB, an over-the-counter market, immediately following delisting from Nasdaq and our trading symbol, “PRKR”, remained unchanged. We intend to remain a public reporting company and we plan to continue to maintain a majority of independent members on our board of directors (“Board”) with an independent Audit Committee and to provide annual financial statements audited by an independent registered public accounting firm and unaudited interim financial statements prepared in accordance with accounting principles generally accepted in the U.S. However, the OTCQB is a significantly more limited market than Nasdaq.
These factors contributed to a lack of liquidity which necessitated a change in our business plans. Accordingly, in August 2018, we implemented cost reduction measures that included a significant reduction in our workforce, the closure of our engineering design center in Lake Mary, Florida and a reduction in executive and management salaries in order to reduce our ongoing operating expenses. As a result of these measures, we ceased ongoing chip development activities and significantly curtailed our spending for development, sales and marketing of our WiFi product line in order to focus our limited resources on our patent enforcement program.program
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which requires a significant investment over a lengthy period of time. We ceased sales of our Milo products during the fourth quarter of 2019 in order to focus solely on our patent enforcement actions.
From a patent enforcement standpoint, we spent much of 2018 defending our patents in validity actions filed by defendants in our patent infringement proceedings.proceedings in both the U.S. and Germany. In October 2018, we received an adverse decision in Germany regarding the validity of one of our patents which was the subject of two infringement proceedings in Germany. In 2019, we received an adverse decision in our third German patent infringement case which we opted not to appeal, thus ending our infringement actions in Germany.
In 2018, we also received a final decision in a validity challenge filed by Qualcomm against patents that are the subject of a case against Qualcomm and HTC in the middle district of Florida (Orlando division). This final decision upheld certain favorable patent claims and ultimately resulted in the stay being lifted in the infringement case in early 2019. In July 2019, the district court denied Qualcomm’s request to limit the claims and patents in the case and 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. The trial is scheduled to begin in December 2020 for this case.
In addition, in July 2019 the district court in the Middle District of Florida (Jacksonville division) issued its claim construction order in our infringement case against Apple and Qualcomm which has been pending since an August 2018 claim construction hearing. The court’s claim construction order adopted our proposed construction for two of the six disputed terms and the “plain and ordinary meaning” on the remaining terms. In addition, the court denied Apple’s motion for summary judgement. This case is scheduled for trial in August 2020.
Currently the Florida cases have temporary stays in place due to COVID-19 which may impact one or more of the trial schedules. See “Legal Proceedings” in Note 1012 to our consolidated financial statements for the year ended December 31, 2019 included elsewhere in this prospectus for a detailed description of our various patent enforcement actions. Notably, a prior stay has been lifted in our patent infringement case against Qualcomm and HTC in the middle district of Florida as a result of an appellate court decision regarding one of the patents at issue in that case. In addition, we are expecting a court decision shortly regarding claim construction in our patent infringement case against Apple and Qualcomm in the middle district of Florida. We anticipate receiving trial schedules for both of these U.S. cases in the near term.
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In addition, on March 15, 2019, we concluded a hearing in Germany in a patent infringement case against Apple for products that incorporate Intel chips. We expect the court’s decision in that case in April 2019. We also filed an appeal in January 2019 of an unfavorable validity decision in Germany that impacts two German cases filed against LG and Apple for products that utilize Qualcomm chips.
A significant portion of our litigation costs are funded under a secured contingent payment arrangement with Brickell Key Investments LP (“Brickell”) and other contingent arrangements with our legal counsel. In 2018, we received an aggregate offunded our operations, including litigation costs, with $4.0 million in additional proceeds received from Brickell to fund our ongoing patent enforcement actions. In addition to Brickell funding, we also funded our operations in 2018and through the sale of approximately $5.3 million in equity and equity-linked securities and $1.3 million in convertible debt. In addition, in the first quarter of 2019, we received additional net proceeds of approximately $1.3 million fromfunded our operations primarily with the sale of additionalapproximately $2.4 million in convertible notes.debt and through contingent arrangements with legal counsel. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations” elsewhere in this prospectus for a full discussion of our litigation funding arrangements and our equity and debt financings.
Milo WiFi Products
Our Milo-branded WiFi products were produced and sold from 2017 to 2019. These products offered a cost-effective networking system to enhance WiFi connectivity by effectively distributing the WiFi signal from existing routers and modems throughout a broader coverage area. We marketed these products primarily to consumers through Amazon.com and other online outlets, including our own direct-to-consumer online retail site.
Our Milo WiFi products did not generate the revenue growth that we anticipated in the first half2018, in part due to our lack of 2018.sufficient financial resources to establish brand recognition and expand sales channels. Accordingly, as part of our restructuring in August 2018, we made significant reductions in our product sales, marketing, development and operations staff as well as our expenditures for advertising and other marketing promotions, causing sales to further decline. We expect to sell or otherwise exit our WiFi product operations inIn the secondfourth quarter of 2019.
Product Offerings
Our Milo-branded WiFi product line is a cost-effective networking system that enhances WiFi connectivity by effectively distributing the WiFi signal from existing routers and modems throughout a broader coverage area, eliminating WiFi dead zones and creating a more even distribution2019, we ceased sales of data rates across the coverage area. Our product offering includes a two-unit system designed for coverage areas of up to 2,500 square feet, a three-unit system designed for coverage areas of up to 3,750 square feet, and a single-unit system, introduced in May 2018, that can be installed as a stand-alone system for smaller homes and apartments, or installed as an add-on to an existing Milo system for added coverage.
The Milo system can connect to an existing router via Ethernet cable. Alternatively, the system can connect to the router wirelessly through our BaseLink technology thus enabling the Milo user to eliminate redundancy of coverage from an existing router while also optimizing and maximizing the overall coverage area. Our embedded SmartSeek intelligence enables the Milo system to delegate signal communication across multiple radios in each Milo unit, thereby optimizing the network path for each unique environment. The systems are supported by mobile applications for both Apple and Android devices to enhance the overall customer experience.
Markets
We marketed our Milo product line as a cost-effective product solution for inadequate WiFi coverage to consumers, small businesses and certain vertical markets, such as internet service providers. The growing number of internet-connected devices, including smart phones, laptops, tablets, Smart Home, and Internet of Things devices such as Smart TVs, security cameras, thermostat controls, game consoles, etc., have increased the need for more robust and reliable networking solutions. Internet connections are being upgraded through high-speed broadband technologies in order to address more complex applications and rich multimedia content. Meanwhile, users want the convenience and flexibility of operating truly mobile devices. As a result, the need for more convenience, broader coverage, and increased reliability of residential and small business WiFi networks is increasing demand for reliable wireless networking products.
Sales Channels
We began sellingThe components for the production of our Milo WiFi products in the U.S. in 2017 primarily through Amazon.com and our own online store. In 2018, we began expanding our online sales channels to include Walmart.com and NeweggBusiness.com. In addition, we utilized consignment arrangements withwere generally purchased from third-party suppliers, including contract manufacturers, on a wholesale distributor to
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supply additional online retail channels. During 2018, we also marketed our products and related services directly to internet service providers in the U.S. although we ceased these efforts following our August 2018 restructuring. The Amazon.com sales channel accounted for approximately 66% and 60% of our net revenues for the years ended December 31, 2018 and 2017, respectively. In addition, a QVC distributor accounted for approximately 13% of our net revenue for the year ended December 31, 2018.
Production and Supply
purchase order basis. To mitigate supply risk, and based on long lead-times and anticipated revenue growth,consumer demand, we built up a significant Milo component and finished product inventory in 2017. To date, our inventory has significantly exceeded the demand generated by our marketing programs.inventory. As a result, in connection with our restructuring in August 2018, we ceased production and recognized impairment charges against our on-hand inventories.
Our components are generally purchased from third-party suppliers, including contract manufacturers, on a purchase order basis. Our components generally have multiple sources of supply; however some components are designed specifically for ourMilo products and, in some cases, require specialty tooling. Our third-party suppliers generally purchase the materials for these components on our behalf on a purchase order basis. Lead times for our component products are generally 60 to 90 days without incurring additional costs for expediting.
Competitive Position
We operate in a highly competitive industry against companies with greater brand recognition and substantially greater financial, technical, and sales and marketing resources. As a result, our competitors have larger distribution channels and greater reach to customers than we do.
Our WiFi products competecompeted with WiFi networking products offered by companies such as Google, Belkin/Linksys, D-Link, NetGear, Eero (recently purchased(purchased by Amazon), and others. We also facefaced competition from service providers who bundle competing networking devices with their service offering. WeAlthough we believe the principal competitive factors in the markets for our networking products include productwere able to compete based on performance, ease-of-installation, price and customer support. support, our competitors have substantially greater financial resources and brand awareness that we believe were significant factors in the lack of success of our product line.
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RF Technologies
Our technologies and integrated circuit products face competition from incumbent providers of transceivers, such as Broadcom, Fujitsu, Intel, MediaTek, NVidia, Qualcomm, STMicroelectronics, Marvell, Texas Instruments, and others, as well as incumbent providers of power amplifiers, including companies such as Anadigics, Qorvo, and Skyworks, among others. Each of our competitors, however, also has the potential of becoming a licensing or product customer for our technologies. To date, we are unaware of any competing or emerging RF technologies other than infringing products, that provide all the simultaneous benefits that certain of our technologies enable including highly accurate transmission and reception of RF carriers that use lessat low power, than traditional architectures and components, thereby extendingenabling extended battery life, reducing heat and enabling certain size, cost, performance, and packaging advantages.
We believe the most significant hurdle to the licensing and/or sale of our technologies and related products is the widespread use of certain of our technologies in infringing products produced by companies with significantly greater financial, technical and sales and marketing resources. We believe we can gain adoption and/or secure licensing agreements with unauthorized current users of one or more of our technologies, and therefore compete, based on a solid and defensible patent portfolio and the advantages enabled by our unique circuit architectures.
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Patents and Trademarks
We consider our intellectual property, including patents, patent applications, trademarks, and trade secrets to be significant to our competitive positioning.business plan. We have a program to file applications for and obtain patents, copyrights, and trademarks in the U.S. and in selected foreign countries where we believe filing for such protection is appropriate to establish and maintain our proprietary rights in our technology and products. As of December 31, 2018,2019, we had 134approximately 130 active U.S. and 33 foreign patents related to our RF technologies. In addition, we have a number of U.S. and foreignrecently expired patents that we believe continue to have significant economic value as a result of our ability to assert past damages in our patent applications pending.enforcement actions. We estimate the economic lives of our patents to be the shorter of fifteen years from issuance or twenty years from the earliest application date. Our current portfolio of issued patents have expirations ranging from 20192020 to 2034. We had approximately 52 patents that expired in 2018, including certain patents that are the subject of enforcement actions. We believe these expired patents continue to have significant economic value to us as a result of our ability to collect past damages in the event of a successful enforcement action.2036.
Employees
As of December 31, 2018,2019, we had 1410 full-time and 2 part-time employees, including 7 in WiFi product development, sales and customer support, 3 in technical support for our patent enforcement and licensing programs, and 6 in executive management, finance, and administration.employees. We also outsource certain specialty services, such as information technology, and utilize temporary or contract staff and third-party consultants from time to time to supplement our workforce. Our employees are not represented by any collective bargaining agreements and we consider our employee relations to be satisfactory.
Available Information and Access to Reports
We file annual reports on Forms 10-K, quarterly reports on Forms 10-Q, proxy statements and other reports, including any amendments thereto, electronically with the SEC. The SEC maintains an Internet site (http://www.sec.gov) where these reports may be obtained at no charge. We also make copies of these reports available, free of charge through our website (http://www.parkervision.com) via the link “SEC filings” as soon as practicable after filing or furnishing such materials with the SEC. We have not incorporated by reference into this prospectus the information on our website, and you should not consider it to be a part of this prospectus.
Properties
Our headquarters are located in a 14,0003,000 square foot leased facility in Jacksonville, Florida. We have an additional 7,000 square foot leased facility in Lake Mary, Florida that was primarily for engineering design activities. As a result of our restructuring in August 2018, we have ceased use of the Lake Mary facility and are attempting to sublease the facility for the remaining lease term. We also lease a 3,000 square foot facility in Jacksonville, Florida that serves as our warehousing space for Milo product inventory. We believe our properties are in good condition and suitable for the conduct of our business. Refer to “Lease Commitments” in Note 108 to our consolidated financial statements included elsewhere in this prospectus for information regarding our outstanding lease obligations.
Legal Proceedings
We are a party to a number of patent enforcement actions initiated by us against others for the infringement of our technologies, as well as proceedings brought by others against us in an attempt to invalidate certain of our patent claims. These patent-related proceedings are more fully described in “Legal Proceedings” in Note 1012 to our consolidated financial statements included elsewhere in this prospectus.
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DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Directors
Our Board is divided into three classes with only one class of directors typically being elected in each year and each class serving a three-year term. In September 2018, our Board decreased its size from eight to five. In connection with this decrease in size, Messrs. Papken der Torossian, William Hightower, John Metcalf, and Nam Suh resigned. The resignation of these directors was not due to any disagreement with us on any matter relating to our operations, policies, practices, or otherwise. The Board appointed Lewis H. Titterton to fill the vacancy resulting from the director resignations. Mr. Titterton was also appointed as chairman of our audit committee. In April 2019, Mr. Lewis Titterton resigned from our boardBoard due to family medical issues. Mr. Titterton’s resignation was not due to any disagreement with us on any matter relating to our operations, policies, or practices, financial or otherwise.
Our current directors, including their backgrounds and qualifications are as follows:
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| Age |
| Position with the Company |
Frank N. Newman |
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| Class II Director, Audit Committee Member |
Jeffrey L. Parker |
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| Class I Director, Chairman of the Board and Chief Executive Officer |
Paul A. Rosenbaum |
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| Class III Director, Audit Committee |
Robert G. Sterne |
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| Class III Director |
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Frank N. Newman
Frank Newman has been a director of ours since December 2016. Mr. Newman has served since 2011 as chairman of Promontory Financial Group China Ltd., an advisory group for financial institutions and corporations in China. From 2005 to 2010, he served as chairman and chief executive officer of Shenzhen Development Bank, a national bank in China. Prior to 2005, Mr. Newman served as chairman, president, and chief executive officer of Bankers Trust and chief financial officer of Bank of America and Wells Fargo Bank. Mr. Newman served as Deputy Secretary of the U.S. Treasury from 1994 to 1995 and as Under Secretary of Domestic Finance from 1993 to 1994. He has authored two books and several articles on economic matters, published in the U.S., mainland China, and Hong Kong. Mr. Newman has served as a director for major public companies in the U.S., United Kingdom, and China, and as a member of the Board of Trustees of Carnegie Hall. He earned his BA, magna cum laude, in economics at Harvard. Mr. Newman brings a substantial knowledge of international banking and business relationships to the Board. His contacts, particularly in China, including Hong Kong, could prove valuable to our international strategies. In addition, his financial background adds an important expertise to the Board with regard to financing future business opportunities.
Jeffrey L. Parker
Jeffrey Parker has been the Chairman of our Board and our Chief Executive Officer since our inception in August 1989 and was our president from April 1993 to June 1998. From March 1983 to August 1989, Mr. Parker served as executive vice president for Parker Electronics, Inc., a joint venture partner with Carrier Corporation performing research, development, manufacturing, and sales and marketing for the heating, ventilation and air conditioning industry. Mr. Parker is a named inventor on 31 U.S. patents. Among other qualifications, as Chief Executive Officer, Mr. Parker has relevant insight into our operations, our industry, and related risks as well as experience bringing disruptive technologies to market.
Paul A. Rosenbaum
Paul A. Rosenbaum has been a director of ours since December 2016 and a member of our Audit Committee since September 2018. Mr. Rosenbaum has extensive experience as a director and executive officer for both public and private companies in a number of industries. Since 1994, Mr. Rosenbaum has served as chief executive of SWR Corporation, a privately-held corporation that designs, sells, and markets specialty industrial chemicals. In September 2017, Mr. Rosenbaum was appointed to the Board of Commissioners for the Oregon Liquor Control Commission and has served as chairman since March 2018. Since 2009, Mr. Rosenbaum has been a member of the Providence St. Vincent Medical Foundation Council of Trustees, and previously served as president of the Council. In addition, from September 2000 until June 2009, Mr. Rosenbaum served as chairman and chief executive officer of Rentrak Corporation (“Rentrak”), a Nasdaq publicly traded company that provides transactional media measurement and analytical services to the entertainment and media industry. From June 2009 until July
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2011, Mr. Rosenbaum served in a non-executive capacity as chairman of Rentrack. From 2007 until 2016, Mr. Rosenbaum served on the Board of Commissioners for the Port of Portland, including as vice chairman from 2012 to 2016. Mr. Rosenbaum was chief partner in the Rosenbaum Law Center from 1978 to 2000 and served in the Michigan Legislature from 1972 to 1978, during which time he chaired the Michigan House Judiciary Committee, was legal counsel to the Speaker of the House of the state of Michigan and wrote and sponsored the Michigan Administrative Procedures Act. Additionally, Mr. Rosenbaum served on the National Conference of Commissioners on Uniform State Laws, as vice chairman of the Criminal Justice and Consumer Affairs Committee of the National Conference of State Legislatures, and on a committee of the Michigan Supreme Court responsible for reviewing local court rules. Among other qualifications, Mr. Rosenbaum has extensive experience as a director and executive officer of a publicly held corporation and has relevant insights into operations and our litigation strategies.
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Robert G. Sterne
Robert Sterne has been a director of ours since September 2006 and also served as a director of ours from February 2000 to June 2003. Since 1978, Mr. Sterne has been a partner of the law firm of Sterne, Kessler, Goldstein & Fox PLLC, specializing in patent and other intellectual property law. Mr. Sterne provides legal services to us as one of our patent and intellectual property attorneys. Mr. Sterne has co-authored numerous publications related to patent litigation strategies. He has received multiple awards for contributions to intellectual property law including Law 360’s 2016 Top 25 Icons of IP and the Financial Times 2015 Top 10 Legal Innovators in North America. Among other qualifications, Mr. Sterne has an in-depth knowledge of our intellectual property portfolio and patent strategies and is considered a leader in best practices and board responsibilities concerning intellectual property.
Former DirectorsDirector Independence
Although our Common Stock is quoted on the OTCQB, we continue to follow the rules of Nasdaq in determining if a director is independent. The Board also consults with our counsel to ensure that the Board’s determination is consistent with those rules and all relevant securities and other laws and regulations regarding the independence of directors. The Board has affirmatively determined that Messrs. Newman, Rosenbaum, and Sterne are independent directors.
Lewis Titterton was appointed by the Board in September 2018 as a result of a vacancy created by our Board restructuring and served until April 2, 2019. Mr. Titterton has a background in technology with an emphasis in healthcare. He is the current chairman of the board of NYMED, Inc., a diversified health services company, a position he has held since 1989. Mr. Titterton also serves as the lead independent director for Anixa Biosciences, Inc., formerly ITUS Corporation, (“Anix”), a Nasdaq biotech company. Mr. Titterton has served as a director of Anix since July 2017 and from August 2010 through August 2016, including as the chairman of the board from July 2012 through August 2016 and interim chief executive officer from August 2012 until September 2012. Mr. Titterton founded MedE America, Inc. in 1986 and was chief executive officer of Management and Planning Services, Inc. from 1978 to 1986. He holds a M.B.A. from the State University of New York at Albany, and a B.A. degree from Cornell University. Mr. Titterton has substantial experience with advising on the strategic development of technology companies and over forty years of experience in various aspects of the technology industry.Information About Our Executive Officers
Papken der Torossian was a director of ours from June 2003 to September 2018. Since 1997, Mr. der Torossian has served as the president and chief executive officer of Crest Enterprises, LLC, a privately-held consulting and investment company. Mr. der Torossian has extensive experience as chairman and chief executive of a number of semiconductor and technology-based companies. Mr. der Torossian was chief executive officer of Silicon Valley Group, Inc. (“SVGI”) from 1986 until 2001 when it was acquired by ASML. Prior to his joining SVGI, from 1981 until 1986, he was president and chief executive officer of ECS Microsystems, a communications and personal computer company that was acquired by Ampex Corporation where he stayed on as a manager for a year. From 1976 to 1981, Mr. der Torossian was president of the Santa Cruz Division of Plantronics where he also served as vice president of the Telephone Products Group. Previous to that, he spent four years at Spectra-Physics, Inc. and 12 years with Hewlett-Packard in a variety of management positions. From August 2007 until its acquisition in 2016, Mr. der Torossian has served as a director and a member of the compensation committee and nominating and governance committees of Atmel Corporation, a publicly traded company.
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William Hightower was a director of ours from March 1999 until September 2018. Mr. Hightower has extensive experience as an executive officer and operating officer for both public and private companies in a number of industries, including telecommunications. From September 2003 to his retirement in November 2004, Mr. Hightower served as our president. Mr. Hightower was the president and chief operating officer and a director of SVGI, from August 1997 until May 2001. SVGI was a publicly held company which designed and built semiconductor capital equipment tools for chip manufacturers. From January 1996 to August 1997, Mr. Hightower served as chairman and chief executive officer of CADNET Corporation, a developer of network software solutions for the architectural industry. From August 1989 to January 1996, Mr. Hightower was the president and chief executive officer of Telematics International, Inc.
John Metcalf was a director of ours from June 2004 to September 2018. From November 2002 until his retirement in July 2010, Mr. Metcalf was a partner with Tatum LLC, the largest executive services and consulting firm in the U.S. Mr. Metcalf has 18 years’ experience as a chief financial officer. From July 2006 to September 2007, Mr. Metcalf served as chief financial officer for Electro Scientific Industries, Inc., a provider of high-technology manufacturing equipment to the global electronics market. From June 2004 to July 2006, Mr. Metcalf served as chief financial officer for Siltronic AG. From August 2011 to February 2013, Mr. Metcalf served on the board of directors and was chairman of the audit, compensation, and nominating committees of Trellis Earth Products, Inc, a privately held company. From June 2007 until July 2011, Mr. Metcalf served on the board of directors and was chairman of the audit committee of EnergyConnect Group, Inc. (formerly Microfield Group, Inc.), a publicly traded company that was acquired by Johnson Controls, Inc. in July 2011.
Nam Suh was a director of ours from December 2003 to September 2018. Dr. Suh served as the president of Korea Advanced Institute of Science and Technology from July 2006 to February 2013. He is a member of the board of trustees of King Abdullah University of Science and Technology of Saudi Arabia and a member of a number of advisory organizations, including the International Advisory Board of King Fahd University of Science and Technology and the Research Advisory Board of Arcelik of Istanbul, Turkey. Dr. Suh is currently the Cross Professor Emeritus at the Massachusetts Institute of Technology (“MIT”) where he had been a member of the faculty since 1970. At MIT, Dr. Suh held many positions including director of the MIT Laboratory for Manufacturing and Productivity, head of the department of Mechanical Engineering, director of the MIT Manufacturing Institute, and director of the Park Center for Complex Systems. In 1984, Mr. Suh was appointed the assistant director for Engineering of the National Science Foundation by President Ronald Reagan and confirmed by the U.S. Senate. From 2005 to 2009, Dr. Suh served on the board of directors of Integrated Device Technology, Inc., a Nasdaq -listed company that develops mixed signal semiconductor solutions, and, from 2004 to 2007, he served on the board of directors of Therma-Wave, Inc., a Nasdaq -listed company that manufactures process control metrology systems for use in semiconductor manufacturing. Dr. Suh has significant experience with technology innovation and the process of new product introduction, including an invention selected as one of the 10 Emerging Technologies of the world by the 2013 World Economic Forum of Davos and 50 most promising new inventions of 2010 by TIME magazine. Dr. Suh is a widely published author of approximately 300 articles and ten books on topics related to tribology, manufacturing, plastics, design, and large systems. Dr. Suh has approximately 100 patents, some of which relate to electric vehicles, polymers, tribology, and design. He has received many national and international honors and awards, including the NSF Distinguished Service Award, 2009 ASME Medal, and nine honorary doctorates from various universities on four continents.
Executive Officers
Our current executive officers are as follows:
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Jeffrey Parker |
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| Chairman of the Board and Chief Executive Officer (“CEO”) |
Cynthia Poehlman |
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| Chief Financial Officer and Corporate Secretary (“CFO” |
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The background for Mr. Jeffrey Parker is included above under the heading “Directors”.
Cynthia Poehlman
Cynthia Poehlman has been our chief financial officer since June 2004 and our corporate secretary since August 2007. From March 1994 to June 2004, Ms. Poehlman was our controller and our chief accounting officer. Ms. Poehlman has been a certified public accountant in the state of Florida since 1989.
Former Executive Officers
Messrs. David Sorrells and Gregory Rawlins both served as our Chief Technology Officers (“CTO”) through 2019. In March 2020, given our reduced scope of operations, in particular our research and development activities, our Board determined to eliminate the Chief Technology Officer role. Both Mr. Sorrells and Mr. Rawlins remain employed by us in technical support roles.
Family Relationships
There are no family relationships among our officers or directors.
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Summary Compensation Table
The following table summarizes the total compensation of each of our “named executive officers” as defined in Item 402(m) of Regulation S-K (the “Executives”) for the fiscal years ended December 31, 2019 and 2018. Given the complexity of disclosure requirements concerning executive compensation, and in particular with respect to the standards of financial accounting and reporting related to equity compensation, there is a difference between the compensation that is reported in this table versus that which is actually paid to and received by the Executives. The amounts in the Summary Compensation Table that reflect the full grant date fair value of an equity award, do not necessarily correspond to the actual value that has been realized or will be realized in the future with respect to these awards.
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(a) | (b) |
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Name and Principal Position | Year |
| Salary |
| Bonus ($) |
| Stock Awards |
| Option Awards |
| All Other |
| Total | ||||||
Jeffrey Parker, CEO | 2019 |
| $ | 260,000 |
| $ | - |
| $ | - |
| $ | 845,766 |
| $ | 24,000 | 5 | $ | 1,129,766 |
| 2018 |
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| 297,500 |
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| - |
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| - |
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| - |
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| 24,000 | 5 |
| 321,500 |
Cynthia Poehlman, CFO | 2019 |
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| 180,000 |
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| - |
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| - |
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| 140,961 |
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| - |
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| 320,961 |
| 2018 |
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| 205,962 |
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| - |
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| - |
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| - |
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| - |
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| 205,962 |
David Sorrells, CTO | 2019 |
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| 158,577 |
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| - |
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| - |
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| - |
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| - |
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| 158,577 |
| 2018 |
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| 252,303 | 2 |
| 2,149 |
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| - |
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| - |
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| - |
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| 254,452 |
John Stuckey, CMO 3 | 2019 |
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| - |
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| - |
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| - |
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| - |
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| - |
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| - |
| 2018 |
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| 175,696 |
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| - |
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| - |
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| - |
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| 7,692 | 3 |
| 183,388 |
Gregory Rawlins, CTO Heathrow | 2019 |
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| 200,000 |
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| - |
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| - |
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| 105,721 |
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| - |
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| 305,721 |
| 2018 |
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| 228,846 | 4 |
| - |
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| - |
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| - |
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| - |
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| 228,846 |
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1. | The amounts represented in columns (e) and (f) represents the full grant date fair value of equity awards in accordance with ASC 718. Refer to Note 14 to the consolidated financial statements for the year ended December 31, 2019 included elsewhere in this prospectus for the assumptions made in the valuation of equity awards. |
2. | Includes $8,481 which represents the grant-date fair value of restricted stock received by the executive in lieu of salary. |
3. | Mr. Stuckey’s employment was terminated in August 2018. The amount reported in column (g) represents amounts paid in connection with termination of executive’s employment, including $7,215 which represents the grant-date fair value of restricted stock received by the executive in lieu of cash. |
4. | Includes $7,692 which represents the grant-date fair value of restricted stock received by the executive in lieu of salary. |
5. | Represents an automobile allowance in the amount of $24,000. |
In August 2018, each of our Executives agreed to a 20% reduction in base salary in connection with our planned restructuring. Mr. Sorrells agreed to an additional reduction in base salary in March 2019. In consideration of our Executive’s voluntary salary reductions, in February 2020, our Board approved equity awards under our 2019 Long Term Incentive Plan including 300,000 RSUs to Mr. Parker, 150,000 RSUs to each of Messrs. Rawlins and Sorrells and 150,000 share options at an exercise price of $0.31 per share to Ms. Poehlman. Refer to Note 18 to our consolidated financial statements for the year ended December 31, 2019 included elsewhere in this prospectus for the terms of the equity awards.
We do not have employment agreements with any of our Executives. We have non-compete arrangements in place with all of our employees, including our Executives, that impose post-termination restrictions on (i) employment or consultation with competing companies or customers, (ii) recruiting or hiring employees for a competing company, and (iii) soliciting or accepting business from our customers. We also have a tax-qualified defined contribution 401(k) plan for all of our employees, including our Executives. We did not make any employer contributions to the 401(k) plan in 2019 or 2018.
28
Outstanding Equity Awards at Fiscal Year End
The following table summarizes information concerning the outstanding equity awards, including unexercised options, unvested stock and equity incentive awards, as of December 31, 2019 for each of our Executives:
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| Number of | Option |
| Option |
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Name |
| (a) |
| (b) | (c) |
| (d) |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Jeffrey Parker |
| 20,000 |
| - |
| 1.98 |
| 8/15/2024 |
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
| 1,500,000 |
| 4,500,000 |
| 0.17 |
| 8/7/2029 |
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Cynthia Poehlman |
| 20,000 |
| - |
| 1.98 |
| 8/15/2024 |
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
| 250,000 |
| 750,000 |
| 0.17 |
| 8/7/2029 |
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
The following table summarizes information concerning the
F-1
Report of Independent Registered Public Accounting Firm To the Board of Directors and Shareholders of ParkerVision, Inc. Opinion on the Consolidated Financial Statements We have audited the accompanying consolidatedbalance sheetof ParkerVision, Inc. (the “Company”) and its subsidiary as of December 31, 2019, andthe related consolidated statements of comprehensive loss, shareholders’ deficit and cash flows for the year then ended, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company and its subsidiary at December 31, 2019, and the results of theiroperations and theircash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America. Basis for Opinion These consolidatedfinancial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s consolidatedfinancial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As a part of our audit, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. Our audit included performing procedures to assess the risks of material misstatement of the consolidatedfinancial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidatedfinancial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audit provides a reasonable basis for our opinion. Emphasis of Matter Regarding Going Concern The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 and Note 9 to the consolidated financial statements, the Company has suffered recurring losses from operations, is in payment default on certain debt, and has a net capital deficiency that raise substantial doubt about its ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 2 and Note 9. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. Our opinion is not modified with respect to this matter /s/ MSL, P.A. We have served as the Company's auditor since 2019. Fort Lauderdale, Florida April 14, 2020 F-2 Report of Independent Registered Public Accounting Firm Shareholders and Board of Directors ParkerVision, Inc. Jacksonville, Florida Opinion on the Consolidated Financial Statements We have audited the accompanying consolidated balance sheet of ParkerVision, Inc. (the “Company”) and its subsidiary as of December 31, 2018, and the related consolidated Basis for Opinion These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB and in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audit included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audit provides a reasonable basis for our opinion. Emphasis of Matter Regarding Going Concern The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the consolidated financial statements, the Company has suffered recurring losses from operations and has a net capital deficiency that raise substantial doubt about its ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 2. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. Our opinion is not modified with respect to this matter /s/ BDO USA, LLP Certified Public Accountants We Jacksonville, Florida April 1, 2019
F-3
PARKERVISION, INC. CONSOLIDATED BALANCE SHEETS
The accompanying notes are an integral part of these consolidated financial statements. F-4
PARKERVISION, INC. CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS FOR THE YEARS ENDED DECEMBER 31, 2018 (in thousands, except per share amounts)
The accompanying notes are an integral part of these consolidated financial statements. F-5
PARKERVISION, INC. CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ DEFICIT FOR THE YEARS ENDED DECEMBER 31,
The accompanying notes are an integral part of these consolidated financial statements. F-6
PARKERVISION, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, (in thousands)
The accompanying notes are an integral part of these consolidated financial statements. F-7
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1. SIGNIFICANT ACCOUNTING POLICIES ParkerVision, Inc. and its wholly-owned German subsidiary, ParkerVision GmbH (collectively “ParkerVision”, “we” or the “Company”) is in the business of innovating fundamental wireless hardware We have designed and developed proprietary radio frequency (“RF”) technologies and integrated circuits for use in We also designed, developed and We restructured our operations during the third quarter of 2018 in order to reduce operating expenses in light of our limited capital resources. Basis of Presentation Our consolidated financial statements are prepared in accordance with generally accepted accounting principles in the Use of Estimates in the Preparation of Financial Statements The preparation of financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. The more significant estimates made by us include projected future cash flows and risk-adjusted discount rates for estimating the fair value of our secured contingent payment obligation, the volatility and estimated lives of share-based awards used in the estimate of the fair market value of share-based compensation, the assessment of recoverability of long-lived assets, the amortization periods for intangible and long-lived assets, and the valuation allowance for deferred taxes. Actual results could differ from the estimates made. We periodically evaluate estimates used in the preparation of the financial statements for continued reasonableness. Appropriate adjustments, if any, to the estimates used are made prospectively based upon such periodic evaluation. F-8 Cash We consider cash and cash equivalents to include cash on hand, interest-bearing deposits, overnight repurchase agreements and investments with original maturities of three months or less when purchased.
Inventory Inventory is stated at the lower of actual cost, as determined under the first-in, first-out method, or estimated net realizable value. We review our inventory for estimated obsolescence or unmarketable inventory and write down inventory for the difference between cost and estimated market value based upon assumptions about future demand. Future demand is affected by market conditions, technological obsolescence, new products and strategic plans, each of which is subject to change. Due to the decision to discontinue Milo product sales in the fourth quarter of 2019, a full reserve was recorded against the remaining inventory on hand at December 31, 2019. Property and Equipment Property and equipment are stated at cost, less accumulated depreciation. Depreciation is determined using the straight-line method over the following estimated useful lives:
The cost and accumulated depreciation of assets sold or retired are removed from their respective accounts, and any resulting net gain or loss is recognized in the accompanying consolidated statements of comprehensive loss. The carrying value of long-lived assets is reviewed on a regular basis for the existence of facts, both internally and externally, that may suggest impairment. Recoverability of assets to be held and used is measured by comparing the carrying amount of an asset to the estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of the assets exceeds its estimated undiscounted future net cash flows, an impairment charge is recognized in the amount by which the carrying amount of the asset exceeds the fair value of the assets. Intangible Assets Patents, copyrights and other intangible assets are amortized using the straight-line method over their estimated period of benefit. We estimate the economic lives of our patents and copyrights to be fifteen to twenty years. Secured Contingent Payment Obligation We have accounted for our secured contingent repayment obligation as long-term debt in accordance with Accounting Standards Codification (“ASC”) 470-10-25, “Sales of Future Revenues or Various other Measures of Income.” Our repayment obligations are contingent upon the receipt of proceeds from patent enforcement and/or patent monetization actions. We have elected to measure our secured contingent payment obligation at its estimated fair value in accordance with ASC 825, “Financial Instruments” based on the variable and contingent nature of the repayment provisions. We have determined that the fair value of our secured contingent payment obligation falls within Level 3 in the fair value hierarchy which involves significant estimates and assumptions including projected future patent-related proceeds and the risk-adjusted rate for discounting future cash flows (see Note
Leases
In February 2016, the FASB established ASC 842, “Leases” by issuing Accounting Standards Update (“ASU”) 2016-02 to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. ASC 842 was subsequently amended by ASU 2018-01, ASU 2018-10 and ASU 2018-11 which provided practical expedients for adoption of ASC 842. Under the new guidance, a lessee will be required to recognize assets and liabilities for capital and operating leases with lease terms of more than 12 months. ASC 842 is effective for interim and annual periods beginning after December 15, 2018. A F-9 modified retrospective transition approach is required for adoption, applying the new standard to all leases existing at the date of initial application. An entity may choose to use either the effective date or the beginning of the earliest comparative period presented in the financial statements as its date of initial application. We adopted ASC 842 Revenue Recognition As of January 1, 2018, we adopted ASC 606, “Revenue from Contracts with Customers” which implements a common revenue standard that clarifies the principles for recognizing revenue. This new revenue recognition model provides a five-step analysis in determining when and how revenue is recognized. The adoption of ASC 606 had no material effect on our consolidated financial statements. We derive revenue from licensing of our intellectual property, settlements from patent infringement disputes and sales of products. The timing of revenue recognition and the amount of revenue recognized depends upon a variety of factors, including the specific terms of each arrangement and the nature of our deliverables and obligations. In general, we recognize revenue when the performance obligations to our customers have been met. For the sale of products, the performance obligation is generally met at the time product is delivered to the customer. Estimated product returns are deducted from revenue and recorded as a liability. Revenue from the sale of our products includes shipping and handling charged to the customer. Product revenue is recorded net of sales tax collected from customers, discounts, and actual and estimated future returns. The consideration received from patent license and settlement agreements is allocated to the various elements of the arrangement to the extent the revenue recognition differs between the elements of the arrangement. Elements related to past and future royalties as well as elements related to settlement will be recorded as revenue in our consolidated statements of comprehensive loss when our performance obligations related to each element have been met.
Shipping and Handling Costs Shipping and handling costs related to product sales for the years ended December 31, Advertising Expense Advertising costs are expensed as incurred. Advertising expenses of approximately Research and Development Expenses Research and development costs are expensed as incurred and include salaries and benefits for employees engaged in research and development activities, costs paid to third party contractors, prototype expenses, an allocated portion of facilities costs, maintenance costs for software development tools, and depreciation. F-10 Accounting for Share-Based Compensation We have various share-based compensation programs which provide for equity awards including stock options, restricted stock units (“RSUs”) and restricted stock awards (“RSAs”). We calculate the fair value of employee share-based equity awards on the date of grant and recognize the calculated fair value as compensation expense over the requisite service periods of the related awards. We estimate the fair value of stock option awards using the Black-Scholes option valuation model. This valuation model requires the use of highly subjective assumptions and estimates including how long employees will retain their stock options before exercising them and the volatility of our common stock price over the expected life of the equity award. Such estimates, and the basis for our conclusions regarding such estimates, are outlined in detail in Note As of January 1, 2018, we adopted ASU No. 2017-09, “Compensation - Stock Compensation (Topic 718): Scope of Modification Accounting.” This update provides guidance on the types of changes to the terms or conditions of share-based payment awards to which an entity would be required to apply modification accounting under ASC 718. The adoption of this guidance did not have a material effect on our consolidated financial statements. As of January 1, 2019, we adopted ASU 2018-07, "Compensation - Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting." The amendments in this update simplify the accounting for share-based payments to nonemployees by aligning it with the accounting for share-based payments to employees, with certain exceptions. We did not previously have awards to nonemployees that would require reassessment and therefore the adoption of ASU 2018-07 did not impact our consolidated financial statements. Income Taxes The provision for income taxes is based on loss before taxes as reported in the accompanying consolidated statements of comprehensive loss. Deferred tax assets and liabilities are recognized for the expected future tax consequences of events that have been included in the financial statements or tax returns. Deferred tax assets and liabilities are determined based on differences between the financial statement carrying amounts and the tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Valuation allowances are established to reduce deferred tax assets when, based on available objective evidence, it is more likely than not that the benefit of such assets will not be realized. Our deferred tax assets exclude unrecognized tax benefits which do not meet a more-likely-than-not threshold for financial statement recognition for tax positions taken or expected to be taken in a tax return.
Loss per Common Share Basic loss per common share is determined based on the weighted-average number of common shares outstanding during each year. Diluted loss per common share is the same as basic loss per common share as all potential common shares are excluded from the calculation, as their effect is anti-dilutive. F-11 The number of shares underlying outstanding options, warrants, unvested
These potential shares were excluded from the computation of diluted loss per share as their effect would have been anti-dilutive. 2. LIQUIDITY AND GOING CONCERN The accompanying consolidated financial statements as of and for the year ended December 31, We have incurred significant losses from operations and negative cash flows in every year since inception and have utilized the proceeds from the sales of our equity and equity-linked securities and our contingent funding arrangements with third-parties to fund our operations, including our litigation costs. For the year ended December 31,
Our ability to meet our liquidity needs for the twelve months after the issuance date of these financial statements is dependent upon one or more of (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 F-12 During the first quarter of 2020, we received aggregate proceeds from the sale of debt and equity securities of approximately $1.6 million, proceeds from the exercise of outstanding warrants of approximately $0.5 million and advances from a potential litigation funding party of approximately $0.6 million. In addition, we repaid approximately $0.7 million in short-term debt and other accrued expenses through the use of shares of our common stock. Despite these funding efforts, our resources are not sufficient to meet our short-term liquidity needs and we will be required to seek additional capital. The long-term continuation of our business plan is dependent upon our ability to secure sufficient financing to support our business, and our ability to generate revenues and/or patent-related proceeds sufficient to offset expenses and meet our contingent payment obligation and other long-term debt repayment obligations. Failure to generate sufficient revenues, raise additional capital through debt or equity financings, and/or reduce operating costs could have a material adverse effect on our ability to meet our short and long-term liquidity needs and achieve our intended long-term business objectives. 3. INVENTORIES Inventories consisted of the following at December 31,
During the years ended December 31,
4. PREPAID EXPENSES Prepaid expenses consisted of the following at December 31,
F-13 In 2018, we recorded impairment charges of approximately $0.4 million related to prepaid licenses and production tooling as a result of the restructuring of our operations. These charges are included in “Restructuring expenses” in the accompanying statements of comprehensive loss (see Note 5. PROPERTY AND EQUIPMENT, NET Property and equipment, at cost, consisted of the following at December 31,
Depreciation expense related to property and equipment was approximately $0.04 million and $0.13 million in 2019 and In connection with the relocation of our corporate headquarters in July 2019, we disposed of a number of assets that were no longer in use. For each of the years ended December 31, 2019 and 2018, we recorded a loss on disposal of fixed assets of approximately $0.01 million. In connection with the closure of our Lake Mary facility in 2018, we reclassified equipment with a net book value of approximately $0.07 million to assets held for sale. We
6. INTANGIBLE ASSETS Intangible assets consisted of the following at December 31,
F-14 Amortization expense for each of the years ended December 31, Future estimated amortization expense for intangible assets that have remaining unamortized amounts as of December 31,
7. ACCRUED LIABILITIES Other accrued expenses consisted of the following at December 31, 2019 and 2018 (in thousands):
Advances are amounts received from litigation counsel as advanced reimbursement of out-of-pocket expenses expected to be incurred by us. Board compensation of $0.4 million at December 31, 2019 and 2018 represents accrued and unpaid board and committee fees from prior periods. In the first quarter of 2020, current and prior board members agreed to waive unpaid cash fees in exchange for share-based compensation awards with an aggregate grant-date fair value of approximately $0.1 million (see Note 18). 8. LEASES We lease our office and other facilities and certain office equipment under long-term, non-cancelable operating and finance leases. Many of our leases include rental escalation clauses, renewal options and/or termination options that are factored into our determination of lease payments when it is reasonably certain that the option will be exercised. For leases with terms greater than 12 months, we record the related asset and obligation at the present value of lease payments over the term. We do not recognize ROU assets and lease liabilities for leases with terms at inception of twelve months or less. At inception, we determine if an arrangement contains a lease and whether that lease meets the classification criteria of a finance or operating lease. Some of our lease arrangements contain lease components (e.g. minimum rent payments) and non-lease components (e.g. services). For certain equipment leases, we account for lease and non-lease components separately based on a relative fair market value basis. For all other leases, we account for the lease and non-lease components (e.g. common area maintenance) on a combined basis. Following the adoption of ASC 842 as of January 1, 2019 (see Note 1), operating leases are included in operating lease right-of-use (ROU) assets and operating lease liabilities on the consolidated balance sheets. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term using the implicit interest rate, when readily available, or our incremental borrowing rate for collateralized debt based on information available at the lease commencement date. Lease expense for operating leases is generally recognized on a straight-line basis over the lease term and is included in operating expenses on the consolidated statement of F-15 comprehensive loss. For the year ended December 31, 2019, we recognized operating lease costs of approximately $0.4 million. Finance leases are included in property and equipment and other accrued expenses on the consolidated balance sheets. Finance leases are recorded as an asset and an obligation at an amount equal to the present value of the minimum lease payments during the lease term. Amortization expense and interest expense associated with finance leases are included in selling, general, and administrative expense and interest expense, respectively, on the consolidated statements of comprehensive loss. Finance leases are not material to our consolidated financial statements as of or for the year ended December 31, 2019. No new finance or operating leases commenced during the year ended December 31, 2019. Supplemental Cash Flow Information The following table summarizes the supplemental cash flow information related to leases, including the ROU assets recognized upon adoption of the new lease standard (in thousands):
Other Information The table below summarizes other supplemental information related to leases:
F-16 Undiscounted Cash Flows The future maturities of lease liabilities consist of the following as of December 31, 2019 (in thousands):
Disclosures related to periods prior to adoption of the new lease standard Lease Commitments The following table presents a summary of our facilities under non-cancelable lease agreements at December 31, 2018:
Deferred rent is amortized to rent expense over the respective lease terms. In addition to sales tax payable on base rental amounts, certain leases obligate us to pay pro-rated annual operating expenses for the properties. Rent expense for our facilities for the year ended December 31, 2018, was approximately $0.5 million. Contractual obligations Future minimum lease payments under all non-cancelable operating leases and capital leases that have initial terms in excess of one year as of December 31, 2018 were as follows (in thousands):
Our contractual obligations as of December 31, 2018 for operating leases include approximately $0.7 million related to our Lake Mary, Florida facility. We ceased use of this facility in 2018 and at December 31, 2018, we have recorded a lease liability of $0.2 million which reflects the estimated net present value of our Lake Mary lease obligation, net of estimated future sublease rental income (see Note 15). F-17 9. LONG-TERMDEBT Notes Payable
Note Payable to a Related Party
Unsecured Short-Term Notes Payable In May and June 2019, we entered into short-term promissory notes with accredited investors for aggregate proceeds of approximately $0.23 million. The notes were unsecured, accrued interest at a rate of 18% per annum and had an original maturity date at the earlier of ninety (90) days following the issuance date or upon our receipt of additional litigation financing. Subsequently, the maturity date for the notes was extended to December 2019 and the interest rate was increased to 20% per annum. In the first quarter of 2020, we issued an aggregate of 1,740,426 shares of our common stock as an in-kind repayment of all outstanding principal and accrued interest on these short-term notes (see Note 18). Interest expense incurred on these short-term notes for the year-ended December 31, 2019, was approximately $0.03 million. Secured Note Payable
The Mintz note provided for an initial installment of F-18 At December 31,
The estimated fair value of our notes payable at December 31,
Convertible Notes In Convertible notes payable at December 31, 2019 and 2018, consist of the following (in thousands):
The July 18, 2019, notes bear interest at a stated rate of 7.5% per annum, while all other notes bear interest at a stated rate of 8% per annum. Interest is payable quarterly and we may elect to pay interest in either cash, shares of our common stock, or a combination thereof, subject to certain equity conditions. For the The shares underlying the 2018 convertible notes, as well as shares reserved for future in-kind interest payments on the notes, were registered on a registration statement that was declared effective on November 13, 2018 (File No. 333-228184). The shares underlying the February and March 2019 convertible notes, as well as shares reserved for future in-kind interest payments on the notes, were registered on a registration statement that was declared effective on April 19, F-19 2019 (File No. 333-230888). The shares underlying the June and July 2019 convertible notes, as well as shares reserved for future in-kind interest payments on the notes, were registered on a registration statement that was declared effective on September 11, 2019 (File No. 333-233390). At the holders’ option, the convertible notes outstanding at December 31,
Secured Contingent Payment Obligation The following table provides a reconciliation of our secured contingent payment obligation measured at estimated fair market value for the year ended December 31,
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 from time to time (the “CPIA”). To date, we have received aggregate proceeds of $18 million, including $4.0 million In Brickell is entitled to priority payment of 55% to 100% of proceeds received from all patent-related actions until such time that Brickell has been repaid in full. After repayment of the funded amount, Brickell is entitled to a portion of remaining proceeds up to a specified minimum return which is determined as a percentage of the funded amount and varies based on the timing of repayment. In addition, Brickell is entitled to a pro rata portion of proceeds from specified legal actions to the extent aggregate proceeds from those actions exceed the specified minimum return. Brickell holds a senior security interest in the majority of our assets until such time as the specified minimum return is paid, in which case, the security interest will be released except with respect to the patents and proceeds related to specific legal actions. The security interest is enforceable by Brickell in the event that we are in default under the agreement F-20 which would occur if (i) we fail, after notice, to pay proceeds to Brickell, (ii) we become insolvent or insolvency proceedings are commenced (and not subsequently discharged) with respect to us, (iii) our creditors commence actions against us (which are not subsequently discharged) that affect our material assets, (iv) we, without Brickell’s consent, incur indebtedness other than immaterial ordinary course indebtedness, or (v) there is an uncured non-compliance of our obligations or misrepresentations under the agreement. As of December 31,
In addition, in the event of a change in control of the Company, Brickell has the right to be paid its return as defined under the CPIA based on the transaction price for the change in control event. We have elected to measure our secured contingent payment obligation at fair value based on probability-weighted estimated cash outflows, discounted back to present value using a discount rate determined in accordance with accepted valuation methods (see Note Other Liabilities Other liabilities include $0.4 million received from a third-party litigation funder as an advance against a funding transaction that was under negotiation. Upon the consummation of a financing transaction with the third-party, the upfront payment would be credited against the financing which is expected to be accounted for as a contingent payment obligation at fair value. If we fail to consummate a funding transaction, we may be obligated to pay, from future patent-related proceeds, an aggregate termination payment equal to five times the upfront payment received. At December 31, 2019, we believe the carrying value of the liability approximates fair value. We received an additional $0.6 million in January 2020 from this funder for an aggregate of $1.0 million in upfront payments. In April 2020, we ceased negotiations with the third-party and, accordingly, we may be obligated to pay a termination fee of up to $5 million from future patent-related proceeds.
ASC 820, “Fair Value
F-21 The following table summarizes financial assets and financial liabilities carried at fair value and measured on a recurring basis as of December 31,
For the years ended December 31, In 2016, we recognized a secured contingent payment obligation upon our receipt of proceeds from Brickell for funding of certain patent-related actions. The fair value of the contingent payment obligation at December 31,
duration; however, our cash flow projections assume a duration through
Our net losses before income taxes for the years ended December 31, No current or deferred tax provision or benefit was recorded in
A reconciliation between the provision for income taxes and the expected tax benefit using the federal statutory rate of 21%
Our deferred tax assets and liabilities relate to the following sources and differences between financial accounting and the tax bases of our assets and liabilities at December 31,
Approximately At December 31, Our ability to benefit from the tax credit carry-forwards could be limited under certain provisions of the Internal Revenue Code if there are ownership changes of more than 50%, as defined by Section 382 of the Internal Revenue Code of 1986 (“Section 382”). Under Section 382, an ownership change may limit the amount of NOL, capital loss and R&D credit carry-forwards that can be used annually to offset future taxable income and tax, respectively. In general, an ownership change, as defined by Section 382, results from transactions increasing the ownership of certain shareholders or public groups in the stock of a corporation by more than 50 percentage points over a three-year period. We conduct a study annually of our ownership changes. Based on the results of our studies, we have determined that we do not have any ownership changes on or prior to December 31, F-
credit carry-forwards under Section 382. Uncertain Tax Positions We file income tax returns in the U.S. federal jurisdiction, :
Future changes in the unrecognized tax benefit will have no impact on the effective tax rate so long as we maintain a full valuation allowance. Our policy is that we recognize interest and penalties accrued on any unrecognized tax benefits as a component of our income tax expense. We do not have any accrued interest or penalties associated with any unrecognized tax benefits. For the years ended December 31,
Legal Proceedings
ParkerVision v. Qualcomm and HTC (Middle District of Florida) We have a patent infringement complaint pending in the Middle District of Florida against Qualcomm and Qualcomm Atheros, Inc. (collectively “Qualcomm”), and HTC (HTC Corporation and HTC America, Inc.) (the “Qualcomm Action”) seeking unspecified damages and injunctive relief for infringement of certain of our patents. Certain of the defendants have filed counterclaims against us for non-infringement and invalidity for all patents in the case. F-24 Qualcomm v. ParkerVision In August 2015, Qualcomm filed an aggregate of ten petitions for Inter Partes Review (“IPR”) with the PTAB seeking to invalidate certain claims related to three of the eleven patents originally asserted in our Qualcomm Action.
ParkerVision v. Apple and Qualcomm
In December 2015, we filed a patent infringement complaint in the Middle District of Florida against Apple, LG, Samsung and Qualcomm alleging infringement of four of our patents. In February 2016, the district court proceedings were stayed pending resolution of ParkerVision v. LG (District of New Jersey) In July 2017, we filed a patent infringement complaint in the district of New Jersey against LG for the alleged infringement of the same patents previously asserted against LG in the middle district of Florida (see ParkerVision v. Apple and Qualcomm above). We elected to dismiss the case in the middle district of Florida and re-file in New Jersey as a result of a F-
ParkerVision v. LG Electronics (Munich, Germany) In June 2016, we filed a complaint in Munich District Court against LG Electronics Deutschland GmbH, a German subsidiary of LG Electronics, Inc. (“LGE”) seeking damages and injunctive relief for the alleged infringement of the German part of our European patent 1 206 831 (“the ‘831 Patent”). A hearing in this case was held in November 2016 at which time the court concluded that certain LGE products using Qualcomm RF circuitry infringe our patent. The final decision in this case was stayed pending resolution of the corresponding nullity, or validity, action filed by Qualcomm in the German Federal Patent Court in Munich (see Qualcomm v. ParkerVision below). In October 2018, we received an unfavorable decision in the nullity case for which we ParkerVision v. Apple (Munich, Germany) - the Apple I case In October 2016, we filed a complaint in Munich District Court against Apple, Inc., Apple Distribution International, and Apple Retail Germany B.V. & Co. KG (collectively “Apple”) seeking damages and injunctive relief for the alleged infringement of the ‘831 Patent (the “Apple I Case”). In February 2017, we amended our complaint adding the infringement of a second German patent and alleging infringement by Apple devices that incorporate an Intel transceiver chip. The Munich Regional Court bifurcated the new claims into a second case (see ParkerVision v. Apple - the Apple II case below). A hearing was held in May 2017 in the Apple I Case. In June 2017, the court deferred its ruling pending the decision from the German Federal Patent Court in the validity action filed by Qualcomm (see Qualcomm v. ParkerVision Qualcomm v. ParkerVision In August 2016, Qualcomm filed a validity action in Federal Patent Court in Germany against the ’831 Patent. The outcome of this validity action impacts our German patent infringement cases against LGE and Apple as discussed above. On October 17, 2018, following an oral hearing, the court ruled that the ‘831 Patent was invalid.
ParkerVision v. Apple (Munich, Germany) The Apple II case Intel v. ParkerVision (Federal Patent Court in Germany) In August 2017, Intel filed a nullity action in German Federal Patent Court claiming invalidity of the ‘853 Patent that is the subject of the Apple II case. F-26 ParkerVision v. Intel (Western District of Texas) In February 2020, we filed a patent infringement complaint in the Western District of Texas against Intel alleging infringement of eight of our patents. The law firm of Goldberg Segalla is representing us in this case on a contingency fee basis.
Preferred Stock We have 15 million shares of preferred stock authorized for issuance at the direction of the board of directors (the “Board”). On November 17, 2005, our Board designated 0.1 million shares of authorized preferred stock as the Series E Preferred Stock in conjunction with its adoption of a Shareholder Protection Rights Agreement. As of December 31, Common Stock We have As of December 31, F-
Stock and Warrant Issuances – Equity Based Financings During the year ended December 31, 2019, the only equity-based financings were the sale of convertible notes (see Note 9). The following table presents a summary of completed
Private Placement with Aspire Capital In July 2018, we entered into a securities purchase agreement (the “PIPE Agreement”) with Aspire Capital Fund LLC (“Aspire Capital”) for the sale of up to $2.0 million of shares of our common stock (or pre-funded warrants) and warrants, in two tranches. Upon the initial closing, we sold to Aspire Capital (i) a pre-funded warrant to purchase up to 2.5 million shares of our common stock with an exercise price of $0.01 per share (“Pre-Funded Warrant”) and (ii) a warrant to purchase up to 2.5 million shares of our common stock with an exercise price of $0.74 per share (a “Warrant”), for an aggregate purchase price of approximately $1.0 million. In addition, pursuant to the PIPE Agreement, in September 2018, we sold to Aspire Capital (i) a second Pre-Funded Warrant to purchase up to 2.5 million shares of common stock exercise price of $0.01 per share and (ii) a second Warrant to purchase an additional 2.5 million shares of common stock at an exercise price of $0.74 per share, for an additional aggregate purchase price of approximately $1.0 million. The aggregate proceeds from the sale of Pre-Funded Warrants and Warrants to Aspire Capital are $1.9 million after deduction of legal fees and registration costs of approximately $0.05 million. The Warrants and Pre-Funded Warrants expire five years after their respective issuance date and have substantially similar other terms, except (i) for exercise price and (ii) that the Warrants are exercisable on the date that is six months after issuance and the Pre-Funded Warrants are immediately exercisable after issuance. The shares underlying the Pre-Funded Warrants and Warrants are registered under a registration statement that became effective in September 2018 (Registration No.333-226738). For the year ended December 31, 2019, we issued approximately 2.9 million shares of our common stock upon exercise of 2.9 million Pre-Funded Warrants and received proceeds totaling approximately $0.03 million. For the year ended December 31, 2018, we issued approximately 2.0 million shares of our common stock upon cashless exercise of 2.1 million Pre-Funded warrants. As of December 31, 2019, Aspire Capital had 5.0 million in outstanding warrants at an exercise price of $0.74 per share. In February 2020, we entered into a warrant amendment agreement with Aspire Capital whereby we repriced the outstanding warrants and issued new, replacement warrants (see Note 18). Director Stock Purchases On March 26, 2018, three of our directors purchased an aggregate of 0.2 million shares of our common stock in an unregistered sale of equity securities at a purchase price of $0.83 per share. Director purchases of our common stock were made at or above market price at the date of purchase (see Note 16). F-
At Market Issuance Sales Agreements
Equity Line Agreement In October 2017, we entered into a common stock purchase agreement (the “Equity Line Agreement”) with Aspire Capital. Under the Equity Line Agreement, Aspire Capital committed to purchase up to an aggregate of $20 million in shares of our common stock over the 30-month term of the Equity Line Agreement. In consideration for entering into the Equity Line Agreement, we issued to Aspire Capital approximately 0.3 million shares of our common stock as a commitment fee. We filed a registration statement to register the sale of up to 4 million shares of our common stock by Aspire Capital under the Equity Line Agreement. The registration statement was declared effective November 27, 2017 (File No. 333-221250).
In June 2019, we issued 625,000 shares of our common stock in Park Consulting In July 2019, we issued a warrant to purchase
Debt Financing In December 2018, we issued a warrant for the purchase of up to 5.0 million shares of our common stock at $0.16 per share to Brickell in connection with an amendment to the CPIA (see Note Common Stock Warrants As of December 31, 2019 and 2018, we had outstanding warrants for the purchase of up to 12.2 million shares and 13.3 million shares of our common stock,
Shareholder Protection Rights Agreement On November 20, 2015, we amended our Shareholder Protection Rights Agreement (“Rights Agreement”) dated November 21, 2005. The amendment extends the expiration date of the Rights Agreement from November 21, 2015 to November 20, 2020 and decreases the exercise price of the rights to $14.50 after giving effect to the one-for-ten reverse stock split that became effective March 30, 2016. F-29 The Rights Agreement provided for the issuance, on November 29, 2005, as a dividend, rights to acquire fractional shares of Series E Preferred Stock. We did not assign any value to the dividend as the value of these rights is not believed to be objectively determinable. The principal objective of the Rights Agreement is to cause someone interested in acquiring us to negotiate with our Board rather than launch an unsolicited or hostile bid. The Rights Agreement subjects a potential acquirer to substantial voting and economic dilution. Each share of common stock issued by ParkerVision will include an attached right. The rights initially are not exercisable and trade with the common stock of ParkerVision. In the future, the rights may become exchangeable for shares of Series E Preferred Stock with various provisions that may discourage a takeover bid. Additionally, the rights have what are known as “flip-in” and “flip-over” provisions that could make any acquisition of us more costly to the potential acquirer. The rights may separate from the common stock following the acquisition of 15% or more of the outstanding shares of common stock by an acquiring person. Upon separation, the holder of the rights may exercise their right at an exercise price of $14.50 per right (the “Exercise Price”), subject to adjustment and payable in cash. Upon payment of the Exercise Price, the holder of the right will receive from us that number of shares of common stock having an aggregate market price equal to twice the Exercise Price, as adjusted. The Rights Agreement also has a flip over provision allowing the holder to purchase that number of shares of common/voting equity of a successor entity, if we are not the surviving corporation in a business combination, at an aggregate market price equal to twice the Exercise Price. We have the right to substitute for any of our shares of common stock that we are obligated to issue, shares of Series E Preferred Stock at a ratio of one ten-thousandth of a share of Series E Preferred Stock for each share of common stock. The Series E Preferred Stock, if and when issued, will have quarterly cumulative dividend rights payable when and as declared by the Board, liquidation, dissolution and winding up preferences, voting rights and will rank junior to other securities of ParkerVision unless otherwise determined by the Board. The rights may be redeemed upon approval of the Board at a redemption price of $0.01. As of December 31, 2019, there are no Series E preferred shares outstanding.
The following table presents share-based compensation expense included in our consolidated statements of comprehensive loss for the years ended December 31,
We did not capitalize any expense related to share-based payments. As of December 31, Stock Incentive Plans 2019 Long-Term Incentive Equity Plan We adopted a long-term incentive equity plan in August 2019 that provides for the grant of stock-based awards to employees, officers, directors and consultants, not to exceed 12.0 million shares of common stock (the “2019 Plan”). The 2019 Plan provides for benefits in the form of nonqualified stock options, stock appreciation rights, restricted stock awards, and other stock based awards. Forfeited and expired options under the 2019 Plan become available for reissuance. The plan provides that non-employee directors may not be granted awards that exceed the lesser of 1.0 million shares or $175,000 in value, calculated based on grant-date fair value. F-30 On August 7, 2019, our Board approved the grant of nonqualified stock options for the purchase of an aggregate of 10,550,000 shares of our common stock with an exercise price of $0.17 per share, vesting in 8 equal quarterly increments commencing September 1, 2019. The option grants were made to executive officers, key employees and non-employee directors and have an aggregate grant date fair value of approximately $1.5 million. At December 31, 2019, 1,450,000 shares of common stock were available for future grants under the 2019 Plan. 2011 Long-Term Incentive Equity Plan We adopted a long-term incentive equity plan in September 2011 that, as amended in 2014, 2016 and 2017, 2008 Equity Incentive Plan We adopted an equity incentive plan in August 2008 (the “2008 Plan”). The 2008 Plan provides for the grant of stock-based awards to employees (excluding named executives), directors and consultants, not to exceed 50,000 shares of common stock. The 2008 Plan provides for benefits in the form of incentive stock options, nonqualified stock options, stock appreciation rights, restricted stock awards, and other stock based awards. Forfeited and expired options under the 2008 Plan become available for reissuance. The plan provides that no participant may be granted awards in excess of 5,000 shares in any calendar year. At December 31, 2000 Performance Equity Plan We adopted a performance equity plan in July 2000 (the “2000 Plan”). The 2000 Plan provided for the grant of options and other stock awards to employees, directors and consultants, not to exceed 500,000 shares of common stock. The 2000 Plan provided for benefits in the form of incentive and nonqualified stock options, stock appreciation rights, restricted stock awards, stock bonuses and various stock benefits or cash. No additional awards may be granted under this plan. Restricted Stock Awards RSAs are issued as executive and employee incentive compensation and as payment for services to others. The value of the award is based on the closing price of our common stock on the date of grant. RSAs are generally immediately vested. Restricted Stock Units RSUs are issued as incentive compensation to executives, employees, and non-employee F-31
RSAs and RSUs The following table presents a summary of RSA and RSU activity under the 2000, 2008, 2011, and
The total fair value of RSAs and RSUs vested under the Stock Plans for the year ended December 31, Stock Options Stock options are issued as incentive compensation to executives, employees and non-employee The following table presents a summary of option activity under the Stock Plans for the year ended December 31,
The weighted average per share fair value of option shares granted during the years ended December 31, 2019 and 2018 was $0.14 and F-32
The fair value of option grants under the Stock Plans for the years ended December 31,
1 The expected term was generally determined based on historical activity for grants with similar terms and for similar groups of employees and represents the period of time that options are expected to be outstanding. For employee options, groups of employees with similar historical exercise behavior are considered separately for valuation purposes. 2 The stock volatility for each grant is measured using the weighted average of historical daily price changes of our common stock over the most recent period equal to the expected option life of the grant. 3 The risk-free interest rate for periods equal to the expected term of the share option is based on the U.S. Treasury yield curve in effect at the measurement date.
For the year ended December 31, 2019, we issued approximately 2.9 million shares
Director Stock Purchases On March 26, 2018, three of our directors purchased an aggregate of 0.2 million shares of our common stock in an unregistered sale of equity securities at a purchase price of $0.83 per F-28 At Market Issuance Sales Agreements In Equity Line Agreement In October 2017, we entered into a common stock purchase agreement (the “Equity Line Agreement”) with Aspire Capital. Under the Equity Line Agreement, Aspire Capital committed to purchase up to an aggregate of $20 million in Stock and Warrant Issuances – Payment for Services Fisher Consulting In June 2019, we issued 625,000 shares of our common stock in exchange for a nonrefundable retainer for services under a consulting agreement with Mark Fisher, valued at approximately $60,000. The value of the retainer was recognized as consulting expense over the six-month term of the agreement. The shares were registered on a
In July 2019, we issued a warrant to purchase up to 1,800,000 shares of our common stock with an exercise price of $0.10 per share in exchange for a nonrefundable retainer for services under a consulting agreement with Park Consultants, LLC, valued at approximately $180,000. The warrant is exercisable immediately after issuance and expires five years following the issuance date. The value of the warrant was determined using the Black-Scholes method. The value of the warrant is being recognized as consulting expense over the eighteen-month term of the consulting agreement. The shares underlying the warrant were registered on a registration statement that was declared effective on September 11, 2019 (File No. 333-233390).
In December 2018, we issued a warrant for the purchase of up to
Common Stock Warrants As of December 31, 2019 and 2018, we had outstanding warrants for the purchase of up to 12.2 million shares and 13.3 million shares of our common stock, respectively. The estimated grant date fair value of these warrants of $1.3 million and $1.8 million at Shareholder Protection Rights Agreement On F-
The The rights initially are not
14. SHARE-BASED COMPENSATION The following table presents share-based compensation expense included in our consolidated statements of comprehensive loss for the
We did not capitalize any expense related to share-based payments. As of Stock Incentive Plans 2019 Long-Term Incentive Equity Plan We
On August 7, 2019, our Board approved the grant of nonqualified stock options for the purchase of an aggregate of 2011 Long-Term Incentive Equity Plan We 2008 Equity Incentive Plan We adopted an equity incentive plan in August 2008 (the “2008 Plan”). The 2008 Plan provides for the grant of stock-based awards to employees (excluding named executives), directors and consultants, not to exceed 50,000 shares of common stock. The 2008 Plan provides for benefits in the form of incentive stock options, nonqualified stock options, stock appreciation rights, restricted stock awards, and other stock based awards. Forfeited and expired options under the 2008 Plan become available for reissuance. The plan provides that no participant may be granted awards in excess of 5,000 shares in any calendar year. At December 31, 2019, 20,473 shares of common stock were available for future grants under the 2008 Plan. 2000 Performance Equity Plan We adopted a performance equity plan in July 2000 (the “2000 Plan”). The 2000 Plan provided for the grant of options and other stock awards to employees, directors and consultants, not to exceed 500,000 shares of common stock. The 2000 Plan provided for benefits in the form of incentive and nonqualified stock options, stock appreciation rights, restricted stock awards, stock bonuses and various stock benefits or cash. No additional awards may be granted under this plan. Restricted Stock Awards RSAs are issued as executive and employee incentive compensation and as payment for services to others. The value of the
Restricted Stock Units RSUs are issued as incentive compensation to executives, employees, and non-employee directors. Each RSU represents a right to one share of our
RSAs and RSUs
The total fair value of RSAs and RSUs vested under the Stock Plans for the year ended December 31, 2019 was $2,000. Stock Options Stock options are issued as incentive compensation to executives, employees and non-employee directors. Stock options are generally granted with exercise prices at or above fair market value of the
The weighted average per share
The
The
2 The stock volatility for each grant is measured using the weighted average of
3 The risk-free interest rate for periods equal to the expected term of Private Placement with Aspire Capital
Warrants to Aspire Capital are $1.9 million after deduction of legal fees and registration costs of approximately $0.05 million. The Warrants and Pre-Funded Warrants expire five years after their respective issuance date and have substantially similar other terms, except (i) for exercise price and (ii) that the Warrants are exercisable on the date that is six months after issuance and the Pre-Funded Warrants are immediately exercisable after issuance. The shares underlying the Pre-Funded Warrants and For the
Director Stock Purchases On March 26, 2018, three of our directors purchased an aggregate of 0.2 million shares of
In 2018, we completed the sale of approximately 1.4 million shares of our common stock at an average price of $0.87 per share under an At Market Issuance Sales Agreement (“ATM”) with FBR Capital Markets & Co. (“FBR”). The shares were registered under a November 2016 shelf registration statement (Registration No. 333-214598). We had no additional amounts available under the shelf registration statement as of December 31, 2018. Equity Line Agreement In October 2017, we entered into a common stock purchase agreement (the “Equity Line Agreement”) with Aspire Capital. Under the Equity Line Agreement, Aspire Capital committed to purchase up to an aggregate of $20 million in shares of our common stock over the 30-month term of the Equity Line Agreement. In consideration for entering into the Equity Line Agreement, we issued to Aspire Capital approximately 0.3 million shares of our common stock as a commitment fee. We filed a registration statement to register the sale of up to 4 million shares of our common stock by Aspire Capital under the Equity Line Agreement. The registration statement was declared effective November 27, 2017 (File No. 333-221250). As of December 31, 2018, we had issued all of the shares available under the registration statement. The term of the Equity Line Agreement expires in April 2020 and we do not anticipate registering any additional shares for sale under this agreement. Stock and Warrant Issuances – Payment for Services Fisher Consulting In June 2019, we issued 625,000 shares of our common stock in exchange for a nonrefundable retainer for services under a consulting agreement with Mark Fisher, valued at approximately $60,000. The value of the retainer was recognized as consulting expense over the six-month term of the agreement. The shares were registered on a registration statement that was declared effective on September 11, 2019 (File No. 333-233390). Park Consulting In July 2019, we issued a warrant to purchase up to 1,800,000 shares of our common stock with an exercise price of $0.10 per share in exchange for a nonrefundable retainer for services under a consulting agreement with Park Consultants, LLC, valued at approximately $180,000. The warrant is exercisable immediately after issuance and expires five years following the issuance date. The value of the warrant was determined using the Black-Scholes method. The value of the warrant is being recognized as consulting expense over the eighteen-month term of the consulting agreement. The shares underlying the warrant were registered on a registration statement that was declared effective on September 11, 2019 (File No. 333-233390). Warrant Issuance in Connection with Debt Financing In December 2018, we issued a warrant for the purchase of up to 5.0 million shares of our common stock at $0.16 per share to Brickell in connection with an amendment to the CPIA (see Note 9). The CPIA is recorded as a liability at its estimated fair value. At the transaction date, the estimated fair value of the liability to Brickell exceeded the net proceeds received from Brickell. Accordingly, no value was assigned to the warrants issued in connection with the transaction. The warrant is immediately exercisable, expires five years from the date of issuance and includes cashless exercise and registration rights. The shares underlying the warrant were registered on a registration statement that was declared effective on April 19, 2019 (File No. 333-230888). Common Stock Warrants As of December 31, 2019 and 2018, we had outstanding warrants for the purchase of up to 12.2 million shares and 13.3 million shares of our common stock, respectively. The estimated grant date fair value of these warrants of $1.3 million and $1.8 million at December 31, 2019 and 2018, respectively, is included in shareholders’ deficit in our consolidated balance sheets. As of December 31, 2019, our outstanding warrants have an average exercise price of $0.44 per share and a weighted average remaining life of approximately four years. Shareholder Protection Rights Agreement On November 20, 2015, we amended our Shareholder Protection Rights Agreement (“Rights Agreement”) dated November 21, 2005. The amendment extends the expiration date of the Rights Agreement from November 21, 2015 to November 20, 2020 and decreases the exercise price of the rights to $14.50 after giving effect to the one-for-ten reverse stock split that became effective March 30, 2016. F-29 The Rights Agreement provided for the issuance, on November 29, 2005, as a dividend, rights to acquire fractional shares of Series E Preferred Stock. We did not assign any value to the dividend as the value of these rights is not believed to be objectively determinable. The principal objective of the Rights Agreement is to cause someone interested in acquiring us to negotiate with our Board rather than launch an unsolicited or hostile bid. The Rights Agreement subjects a potential acquirer to substantial voting and economic dilution. Each share of common stock issued by ParkerVision will include an attached right. The rights initially are not exercisable and trade with the common stock of ParkerVision. In the future, the rights may become exchangeable for shares of Series E Preferred Stock with various provisions that may discourage a takeover bid. Additionally, the rights have what are known as “flip-in” and “flip-over” provisions that could make any acquisition of us more costly to the potential acquirer. The rights may separate from the common stock following the acquisition of 15% or more of the outstanding shares of common stock by an acquiring person. Upon separation, the holder of the rights may exercise their right at an exercise price of $14.50 per right (the “Exercise Price”), subject to adjustment and payable in cash. Upon payment of the Exercise Price, the holder of the right will receive from us that number of shares of common stock having an aggregate market price equal to twice the Exercise Price, as adjusted. The Rights Agreement also has a flip over provision allowing the holder to purchase that number of shares of common/voting equity of a successor entity, if we are not the surviving corporation in a business combination, at an aggregate market price equal to twice the Exercise Price. We have the right to substitute for any of our shares of common stock that we are obligated to issue, shares of Series E Preferred Stock at a ratio of one ten-thousandth of a share of Series E Preferred Stock for each share of common stock. The Series E Preferred Stock, if and when issued, will have quarterly cumulative dividend rights payable when and as declared by the Board, liquidation, dissolution and winding up preferences, voting rights and will rank junior to other securities of ParkerVision unless otherwise determined by the Board. The rights may be redeemed upon approval of the Board at a redemption price of $0.01. As of December 31, 2019, there are no Series E preferred shares outstanding. 14. SHARE-BASED COMPENSATION The following table presents share-based compensation expense included in our consolidated statements of comprehensive loss for the years ended December 31, 2019 and 2018, respectively (in thousands):
We did not capitalize any expense related to share-based payments. As of December 31, 2019, there was $1.1 million of total unrecognized compensation cost related to all non-vested share-based compensation awards. That cost is expected to be recognized over a weighted-average period of approximately 1.4 years. Stock Incentive Plans 2019 Long-Term Incentive Equity Plan We adopted a long-term incentive equity plan in August 2019 that provides for the grant of stock-based awards to employees, officers, directors and consultants, not to exceed 12.0 million shares of common stock (the “2019 Plan”). The 2019 Plan provides for benefits in the form of nonqualified stock options, stock appreciation rights, restricted stock awards, and other stock based awards. Forfeited and expired options under the 2019 Plan become available for reissuance. The plan provides that non-employee directors may not be granted awards that exceed the lesser of 1.0 million shares or $175,000 in value, calculated based on grant-date fair value. F-30 On August 7, 2019, our Board approved the grant of nonqualified stock options for the purchase of an aggregate of 10,550,000 shares of our common stock with an exercise price of $0.17 per share, vesting in 8 equal quarterly increments commencing September 1, 2019. The option grants were made to executive officers, key employees and non-employee directors and have an aggregate grant date fair value of approximately $1.5 million. At December 31, 2019, 1,450,000 shares of common stock were available for future grants under the 2019 Plan. 2011 Long-Term Incentive Equity Plan We adopted a long-term incentive equity plan in September 2011 that, as amended in 2014, 2016 and 2017, provides for the grant of stock-based awards to employees, officers, directors and consultants, not to exceed 3.0 million shares of common stock (the “2011 Plan”). The 2011 Plan provides for benefits in the form of incentive stock options, nonqualified stock options, stock appreciation rights, restricted stock awards, and other stock based awards. Forfeited and expired options under the 2011 Plan become available for reissuance. The plan provides that no participant may be granted awards in excess of 150,000 shares in any calendar year. At December 31, 2019, 588,127 shares of common stock were available for future grants under the 2011 Plan. 2008 Equity Incentive Plan We adopted an equity incentive plan in August 2008 (the “2008 Plan”). The 2008 Plan provides for the grant of stock-based awards to employees (excluding named executives), directors and consultants, not to exceed 50,000 shares of common stock. The 2008 Plan provides for benefits in the form of incentive stock options, nonqualified stock options, stock appreciation rights, restricted stock awards, and other stock based awards. Forfeited and expired options under the 2008 Plan become available for reissuance. The plan provides that no participant may be granted awards in excess of 5,000 shares in any calendar year. At December 31, 2019, 20,473 shares of common stock were available for future grants under the 2008 Plan. 2000 Performance Equity Plan We adopted a performance equity plan in July 2000 (the “2000 Plan”). The 2000 Plan provided for the grant of options and other stock awards to employees, directors and consultants, not to exceed 500,000 shares of common stock. The 2000 Plan provided for benefits in the form of incentive and nonqualified stock options, stock appreciation rights, restricted stock awards, stock bonuses and various stock benefits or cash. No additional awards may be granted under this plan. Restricted Stock Awards RSAs are issued as executive and employee incentive compensation and as payment for services to others. The value of the award is based on the closing price of our common stock on the date of grant. RSAs are generally immediately vested. Restricted Stock Units RSUs are issued as incentive compensation to executives, employees, and non-employee directors. Each RSU represents a right to one share of our common stock, upon vesting. The RSUs are not entitled to voting rights or dividends, if any, until vested. RSUs generally vest over a one to three year period for employee awards and a one year period for non-employee director awards. The fair value of RSUs is generally based on the closing price of our common stock on the date of grant and is amortized to share-based compensation expense over the estimated life of the award, generally the vesting period. F-31 RSAs and RSUs The following table presents a summary of RSA and RSU activity under the 2000, 2008, 2011, and 2019 Plans (collectively, the “Stock Plans”) as of December 31, 2019 (shares in thousands):
The total fair value of RSAs and RSUs vested under the Stock Plans for the year ended December 31, 2019 was $2,000. Stock Options Stock options are issued as incentive compensation to executives, employees and non-employee directors. Stock options are generally granted with exercise prices at or above fair market value of the underlying shares at the date of grant. The fair value of options granted is estimated using the Black-Scholes option pricing model. Generally, fair value is determined as of the grant date. Options for employees, including executives and non-employee directors, are generally granted under the Stock Plans. The following table presents a summary of option activity under the Stock Plans for the year ended December 31, 2019 (shares in thousands):
The weighted average per share fair value of option shares granted during the years ended December 31, 2019 and 2018 was $0.14 and $0.46, respectively. The total fair value of option shares vested was $0.5 million for each of the years ended December 31, 2019 and 2018. F-32 The fair value of option grants under the Stock Plans for the years ended December 31, 2019 and 2018, respectively, was estimated using the Black-Scholes option-pricing model with the following assumptions:
1 The expected term was generally determined based on historical activity for grants with similar terms and for similar groups of employees and represents the period of time that options are expected to be outstanding. For employee options, groups of employees with similar historical exercise behavior are considered separately for valuation purposes. 2 The stock volatility for each grant is measured using the weighted average of historical daily price changes of our common stock over the most recent period equal to the expected option life of the grant. 3 The risk-free interest rate for periods equal to the expected term of the share option is based on the U.S. Treasury yield curve in effect at the measurement date. Options by Price Range The options outstanding at December 31, 2019 under all plans have exercise price ranges, weighted average contractual lives, and weighted average exercise prices as follows (weighted average lives in years and shares in thousands):
Upon exercise of options under all plans, we issue new shares of our common stock. For shares issued upon exercise of equity awards granted under the Stock Plans, the shares of common stock are registered. For shares issued upon exercise of non-plan awards, the shares are not registered unless they have been subsequently registered by us on a registration statement. We had no option exercises for the years ended December 31, 2019 or 2018. 15. RESTRUCTURING CHARGES In August 2018, as a result of our limited capital resources, our Board approved plans to reduce our ongoing operating expenses, including a reduction in workforce of approximately 30 employees and closure of our engineering design facility in Lake Mary, Florida. As a result of the cost reduction measures, we ceased any ongoing integrated circuit design activities and significantly reduced our sales and marketing expenditures with respect to our Milo products. Expenses related to our restructuring are included in operating expenses in our consolidated statements of comprehensive loss under the heading “Restructuring charges.” F-33 Restructuring charges for the year ended December 31, 2018 include the following (in thousands):
Termination Benefits Accrued one-time termination benefits consist of the following (in thousands):
Lease Payable In connection with the cease-use date of our Lake Mary, Florida facility, we recorded a lease payable for the estimated fair value of remaining lease rental payments, less estimated sublease rentals, net of deferred rent. Our lease payable consists of the following (in thousands):
On January 1, 2019, we adopted ASC 842 (refer to Note 8, “Leases”) and recognized an operating lease liability of $0.52 million and a right-of-use asset of $0.34 million related to our Lake Mary facility. 16. RELATED PARTY TRANSACTIONS We paid approximately $0.02 million and $0.03 million in 2019 and 2018, respectively, for patent-related legal services to SKGF, of which Robert Sterne, one of our directors since September 2006, is a partner. In addition, we paid approximately $0.06 million in 2018 for principal and interest on the SKGF Note (refer to “Note Payable to a Related Party” included Note 9). No payments were made in 2019 on the SKGF Note. The SKGF Note has an outstanding balance, including accrued interest, of approximately $0.9 million at December 31, 2019. On September 10, 2018, F-34 On March 26, 2018, three of our directors purchased an aggregate of 0.2 million shares of our common stock in an unregistered sale of equity securities at a purchase price of $0.83 per share, which represented the closing bid price of our common stock on the purchase date. (see Note 13). 17. CONCENTRATIONS OF CREDIT RISK Financial instruments that potentially subject us to a concentration of credit risk principally consist of cash and cash equivalents. Cash and cash equivalents are primarily held in bank accounts and overnight investments. At 18. SUBSEQUENT EVENTS Debt and Equity Financings In January 2020, we sold an aggregate of $0.5 million in convertible notes to accredited investors. The notes mature five years from the date of issuance
thereof. We also entered into a registration rights Also in January 2020, we received proceeds of approximately $0.2 million from the sale, on a private placement basis, of an aggregate of 1,169,232 shares of our common stock at a price of $0.13 per share, and 166,667 shares (together, the “Shares”) of our common stock at a price of $0.15 per share to accredited investors. The subscription agreements for the private placement transactions contain customary representations and warranties of the purchaser. We On February 28, 2020, we entered into a warrant amendment agreement (the “Warrant Amendment Agreement”) with Aspire Capital, with respect to warrants issued in July and September 2018 that are exercisable, collectively, into 5,000,000 shares of common stock (the “Existing Warrants”). The Warrant Amendment Agreement provides for a reduction in the exercise price for the Existing Warrants from $0.74 to $0.35 per share and the issuance of a new warrant for the purchase of 5,000,000 shares of common stock at an exercise price of $0.74 per share (the “New Warrant”). The Warrant Amendment Agreement also adds a call provision to the Existing Warrants whereby we may, after December 31, 2020, call for cancellation of all or a portion of the Existing Warrants in exchange for consideration of $0.001 per warrant share. The call provision is subject to certain conditions, including the continued existence of an effective registration statement for the underlying warrant shares and the availability of sufficient authorized shares to allow for the exercise of the Existing Warrant. In connection with the Warrant Amendment Agreement, Aspire Capital exercised a portion of the Existing Warrant for the purchase of approximately 1.5 million shares for net proceeds to us of approximately $0.5 million. We agreed to file a registration statement to register the shares underlying the New Warrant. In March 2020, we received aggregate proceeds of $0.9 million from the sale, on a private placement basis, of an aggregate of 2,571,432 shares of our common stock at a price of $0.35 per share to accredited investors. The subscription agreements for the private placement transactions contain customary representations and warranties of the purchaser. We also entered into a registration rights agreement with the investors pursuant to which we will register the shares. We have committed to file the registration statement by the 60th calendar day following the closing date and to cause the
The
On January 9, 2020, we issued
On January 15, 2020 we issued 500,000 unregistered shares of our common stock as an in-kind payment of approximately $0.075 million in outstanding amounts payable to Stacie Wilf, a related party. On February 28, 2020, we issued an aggregate of 1,526,426 unregistered shares of our common stock as an in-kind payment of approximately $0.24 million in outstanding principal and accrued interest on a May 15, 2019 promissory note with an accredited investor. (see “Unsecured Short-term Notes Payable in Note 9). Share Based Compensation Arrangements On January 14, 2020, the Board granted nonqualified stock options to purchase 218,000 shares at On February 9, 2020, the Board approved equity awards under the Company’s 2019 Long Term Incentive Plan (the “2019 Plan”) to executives as consideration for the executives’ voluntary reduction in base salaries since July 2018. The grants were made to the
In addition, on February 9, 2020, the Board approved equity awards to independent directors under the 2019 Plan for the directors’ continued waiver of all cash fees for board or committee service. The grants were made to the following directors in the following amounts: RSUs for 150,000 shares to Frank Newman and an option for the purchase of 150,000 shares at an exercise price of $0.31 per share to each of Robert Sterne and Paul Rosenbaum. The non-employee director awards all vest 50% upon grant with the remaining portion vesting in four equal quarterly installments commencing May 9, 2020. The Board also awarded an immediately vested option to purchase 100,000 shares at an exercise price of $0.31 per share under the Company’s 2011 Long Term Incentive Equity Plan to Robert Sterne in exchange for Mr. Sterne’s waiver of approximately $0.1 million in accrued and unpaid fees for board and committee service from 2016 to 2018. Each of the options awarded expire on February 9, 2027.
PART II INFORMATION NOT REQUIRED IN PROSPECTUS Item 13.Other Expenses of Issuance and Distribution The estimated expenses in connection with the sale of the securities being registered hereby, all of which will be borne by us, are as follows:
Item 14.Indemnification of Directors and Officers. The laws of the Florida permit the indemnification of directors, employees, officers and agents of Florida corporations. Our articles of incorporation and bylaws provide that we shall indemnify to the fullest extent permitted by Florida law any person whom we may indemnify under that law. The provisions of Florida law that authorize indemnification do not eliminate the duty of care of a director. In appropriate circumstances, equitable remedies such as injunctive or other forms of non-monetary relief will remain available. In addition, each director will continue to be subject to liability for (a) violations of criminal laws, unless the director has reasonable cause to believe that his conduct was lawful or had no reasonable cause to believe his conduct was unlawful, (b) deriving an improper personal benefit from a transaction, (c) voting for or assenting to an unlawful distribution and (d) willful misconduct or conscious disregard for our best interests in a proceeding by or in our right to procure a judgment in its favor or in a proceeding by or in the right of a shareholder. The statute does not affect a director's responsibilities under any other law, such as the federal securities laws. We have entered into indemnification and reimbursement agreements with each of our directors. The effect of the foregoing is to require us to indemnify our officers and directors for any claim arising against such persons in their official capacities if such person acted in good faith and in a manner that he or she reasonably believed to be in or not contrary to the best interests of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his or her conduct was unlawful. We have directors and officer’s insurance which includes insurance for claims against these persons brought under securities laws. To the extent that we indemnify our management for liabilities arising under securities laws, we have been informed by the SEC that this indemnification is against public policy and is therefore unenforceable.
Item 15.Recent Sales of Unregistered Securities The information contained in the prospectus Convertible Notes From September 2018 to July 2019, we sold convertible notes to accredited investors that are convertible, at the holders’ option, into shares of our Common Stock at fixed conversion prices including (i) September 10, 2018 sale of notes with $0.40 per share fixed conversion price for aggregate proceeds of $900,000, (ii) September 19, 2018 sale of notes with a $0.57 per share fixed conversion price for aggregate proceeds of $425,000, (iii) February and March 2019 sale of notes with a fixed conversion price of $0.25 per share for aggregate proceeds of $1.3 million, (iv) June and July 2019 sale of notes with a fixed conversion price of $0.10 per share for aggregate proceeds of $390,000, (v) July 18, 2019 notes with a fixed conversion price of $0.08 per share for aggregate proceeds of $700,000 (collectively, the “Notes”). II-1 The notes mature five years from the date of issuance. The July 18, 2019 notes bear interest at a stated rate of 7.5% per annum. All other notes bear interest at a rate of 8.0% 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 (“Repayment Shares”), or a combination thereof. In an 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. The number of Repayment Shares is determined by dividing the interest payment amount by the closing price of our Common Stock on the trading day prior to the interest payment date, which may be less than the stated conversion price of the Notes. We may only elect to issue Repayment Shares if (i) no event of default has occurred or is occurring, (ii) the holder has not been issued greater than 14.99% of our then outstanding shares, inclusive of the Repayment Shares being issued, unless expressly waived by the Board, (iii) the Repayment Shares are registered on an effective Registration Statement or otherwise subject to an exemption therefrom, and (iv) our shares are listed or quoted on a market or exchange which includes the OTCQB, the OTCQX or the “Pink Sheets” published by the OTC Market Groups. With the exception of the July 18, 2019 notes, at any time following the one-year anniversary of the issuance of the Notes, we may prepay the then outstanding principal amount of the Notes, along with any accrued interest (the “Prepayment Amount”), upon at least thirty (30) days written notice to the holder (“Prepayment Notice”). The holder will have the right, upon written notice within twenty (20) business days of receipt of the Prepayment Notice, to convert all or a portion of the Prepayment Amount into shares of our Common Stock at the fixed conversion price. Any Prepayment Amount in cash will include a premium of 25% prior to the two-year anniversary of the Notes issuance date, 20% prior to the three-year anniversary of the Notes issuance date, 15% prior to the four-year anniversary of the Notes issuance date, or 10% thereafter. Under the terms of the notes, no holder shall have the right to convert the notes to the extent that, after giving effect to such conversion, the holder would beneficially own in excess of 4.99% (the “Maximum Percentage”) of the number of shares of Common Stock outstanding immediately after giving effect to the conversion. Upon written notice to us, a holder may from time to time increase or decrease the Maximum Percentage to any other percentage not in excess of 9.99%. One of the selling stockholders, GEM Partners, LP, has increased its maximum percentage to 9.99%. The Notes were offered and sold on a private placement basis in reliance on Section 4(a)(2) of the Securities Act and Regulation D promulgated thereunder. The shares underlying the September 2018 notes, including shares reserved for in-kind interest payments on the notes, were registered on a registration statement that was declared effective on November 13, 2018 (File No. 333-228184). The shares underlying the February and March 2019 notes, including shares reserved for in-kind interest payments on the notes, were registered on a registration statement that was declared effective on April 19, 2019 (File No. 333-230888). The shares underlying the June and July 2019 notes, including shares reserved for in-kind interest payments on the notes, were registered on a registration statement that was declared effective on September 3, 2019 (File No. 333-233390). Consulting Agreements On July 22, 2019, we entered into a consulting agreement with Park Consultants LLC to act as special advisor to our chief executive officer with regard to our future business strategies. As consideration for services to be provided under the eighteen-month term of the consulting agreement, we issued a warrant to purchase up to 1,800,000 shares of our Common Stock with an exercise price of $0.10 per share (the “Park Consulting Warrant”) in exchange for a nonrefundable retainer for services. The Park Consulting Warrant became exercisable immediately after issuance and expires five years following the issuance date. The Park Consulting Warrant was offered and sold on a private placement basis in reliance on Section 4(a)(2) of the Securities Act and Regulation D promulgated thereunder. On June 7, 2019, we entered into a consulting agreement with Mark Fisher (“Fisher”) to act as special advisor to our chief executive officer with regard to our future business strategies. As consideration for services to be provided under the six-month term of the consulting agreement, we issued 625,000 shares of unregistered Common Stock in exchange for a nonrefundable retainer for services over the six-month term of the agreement valued at approximately $60,000. Such shares of Common Stock were offered and sold on a private placement basis in reliance on Section 4(a)(2) of the Securities Act and Regulation D promulgated thereunder. The shares underlying the Park Consulting Warrant and the Fisher shares were registered on a registration statement that was declared effective on September 3, 2019 (File No. 333-233390). II-2 Warrants In December 2018, we issued a warrant for the purchase of up to 5.0 million shares of our Common Stock at$0.16 per share to Brickell in connection with an amendment to our funding agreement in consideration of Brickell Key Investments, LP (“Brickell”) exercising a right of first offer to provide $2.5 million in additional funding for purposes of advancing our patent assertion program under a Claims Proceeds Investment Agreement dated February 25, 2016 (“CPIA”). The warrant is immediately exercisable, expires five years from the date of issuance and includes cashless exercise and registration rights. In addition, in connection with the transaction, we amended the CPIA to provide that in the event of a change in control of the Company, Brickell has the right to be paid its return as defined under the CPIA based on the transaction price for the change in control event. The warrant was offered and sold to an accredited investor on a private placement basis in reliance on Section 4(a)(2) of the Securities Act. The shares underlying the warrant were registered under a Form S-1 registration statement that was declared effective on April 19, 2019 (File No. 333-230888). On July 26, 2018, we entered into a securities purchase agreement with Aspire whereby we agreed to sell to Aspire up to $2.0 million of shares of our Common Stock (or pre-funded warrants in lieu thereof) and warrants, in two tranches. On July 26, 2018, we sold to Aspire (i) a pre-funded warrant to purchase up to 2,500,000 shares of our Common Stock with an exercise price of $.01 per share (“Pre-Funded Warrant”) and (ii) a warrant to purchase up to 2,500,000 shares of our Common Stock with an exercise price of $.74 per share (a “Warrant”), for a purchase price of $975,000. In addition, on the day following the effectiveness of the registration statement described below, we sold to Aspire (i) a second Pre-Funded Warrant to purchase up to 2,500,000 shares of our Common Stock with an exercise price of $0.01 per share and (ii) a Warrant to purchase an additional 2,500,000 shares of Common Stock at an exercise price of $0.74 per share, for an aggregate purchase price of $975,000. The shares underlying this transaction were registered under a Form S-1 registration statement that was declared effective on September 10, 2018 (File No. 333-226738). Director Purchase On March 26, 2018, three of our directors purchased an aggregate of approximately 200,000 shares of our Equity Line Agreement On October 17, 2017, we entered into a common stock purchase agreement (the “Equity Line Agreement”) with Aspire
Item 16.Exhibits and Financial
None. Item 17.Undertakings
Provided, however, that paragraphs (a)(1)(i), (ii), and (iii) do not apply if the registration statement is on Form S-1, Form S-3, Form SF-3 or Form F-3 and the information required to be included in a post-effective amendment by those paragraphs is contained in reports filed with or furnished to the Commission by the registrant pursuant to section 13 or section 15(d) of the Securities Exchange Act of 1934 that are incorporated by reference in the registration statement,
or, as to a registration statement on Form S-3, Form SF-3 or Form F-3, is contained in a form of prospectus filed pursuant to 424(b) of this chapter that is part of the registration statement.
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EXHIBIT INDEX
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* Filed herewith ** Management contract or compensatory plan or arrangement II-8 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Jacksonville, State of Florida on this
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Jeffrey L. Parker and Cynthia L. Poehlman, and each of them, with full power to act without the other, such person’s true and lawful attorneys-in-fact and agents, with full power of substitution and re-substitution, for him and in his name, place and stead, in any and all capacities, to sign this registration statement, any and all amendments thereto (including post-effective amendments), and any amendments thereto and to file the same, with exhibits and schedules thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing necessary or desirable to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, or their or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the dates indicated.
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