SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
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| (X) ANNUAL REPORT PURSUANT TO SECTION 13 OR |
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the fiscal year ended December 31, 20182020
or
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( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR |
15(d) OF THE SECURITIES ACT OF 1934 |
For the transition period from ________to__________ |
Commission file number 000-22904
PARKERVISION, INC.
(Exact Name of Registrant as Specified in its Charter)
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Florida |
| 59-2971472 |
(State of Incorporation) |
| (I.R.S. Employer ID No.) |
7915 Baymeadows Way,4446-1A Hendricks Avenue, Suite 400354,
Jacksonville, Florida 3225632207
(Address of Principal Executive Offices)
Registrant’s telephone number, including area code: (904) 732-6100
Securities registered pursuant to Section 12(b) of the Act:
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Title of Each Class | Trading Symbol(s) | Name of Each Exchange on Which Registered |
Common Stock, $.01 par value | PRKR | OTCQB |
Common Stock Rights |
| OTCQB |
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ( ) No (X)
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Securities Exchange Act. Yes ( ) No (X)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes (X) No(No ( )
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes (X) No ( )
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ( )
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
(Check one):
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Large accelerated filer ( ) | Accelerated filer ( ) |
Non-accelerated filer | Smaller reporting company (X) |
| Emerging growth company ( ) |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ( )
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit reports. ( )
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Securities Exchange Act). Yes ( ) No (X)
As of June 29, 2018,30, 2020, the aggregate market value of the registrant’s common stock, $.01 par value, held by non-affiliates of the registrant was approximately $16,140,726$23,474,499 (based upon $0.66$0.49 share closinglast sale price on that date, as reported by NASDAQ)OTCQB).
As of March 29, 2019, 30,637,59130, 2021, 69,886,849 shares of the Issuer's Common Stock were outstanding.
TABLE OF CONTENTS
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Management’s Discussion and Analysis of Financial Condition and Results of Operations | ||
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure | ||
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Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters | ||
Certain Relationships and Related Transactions and Director Independence | ||
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Unless the context otherwise requires, in this Annual Report on Form 10-K (“Annual Report”), “we”, “us”, “our” and the “Company” mean ParkerVision, Inc. and its wholly-owned German subsidiary, ParkerVision GmbH.
Forward-Looking Statements
We believe that it is important to communicate our future expectations to our shareholders and to the public. This Annual Report contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including, without limitation, statements about our future plans, objectives, and expectations under the headings “Item 1. Business” and “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Forward-looking statements include any statement that does not directly relate to any historical or current fact. When used in this Annual Report and in future filings by the Company with the Securities and Exchange Commission (“SEC”), the words or phrases “will likely result”, “management expects”, “we expect”, “will continue”, “is anticipated”, “estimated” or similar expressions are intended to identify such “forward-looking statements.” Readers are cautioned not to place undue reliance on such forward-looking statements, each of which speaks only as of the date made. Such statements are subject to certain risks and uncertainties that could cause actual results to differ materially from historical results and those presently anticipated or projected, including the risks and uncertainties set forth in this Annual Report under the heading “Item 1A. Risk Factors” and in our other periodic reports. Examples of such risks and uncertainties include general economic and business conditions, the outcome of litigation, competition, unexpected changes in technologies and technological advances, the timely development and commercial acceptance of new products and technologies, reliance on key business relationships, reliance on our intellectual property, and the ability to obtain adequate financing in the future. We have no obligation to publicly release the results of any revisions whichthat may be made to any forward-looking statements to reflect anticipated events or circumstances occurring after the date of such statements.
We were incorporated under the laws of the state of Florida on August 22, 1989. We are in the business of innovating fundamental wireless 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 the primary focus of our business plan includesis the enforcement of our intellectual property rights through patent infringement litigation and licensing efforts. We currently have patent enforcement actions ongoing in various U.S. district courts against mobile handset providers and providers of smart televisions and other WiFi products and, in certain cases, their chip suppliers for the infringement of several of our RF patents. We have made significant investments in developing and protecting our technologies, the returns on which are dependent upon the generation of future revenues for realization.
We have also designedIn 2018, we restructured our operations to reduce operating expenses in light of our limited capital resources. As part of that restructuring, we made significant reductions in our investment in the development and developedmarketing of a consumer distributed WiFi product line that is marketed under the brand name Milo®. We expect to sell or otherwise exit the Milo product operations in the second quarter ofIn early 2019, we ceased substantially all ongoing research and intend to focus our resources solely on licensingdevelopment efforts and, enforcement of our wireless technologieswhere.
General Development of Business
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.
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In addition, tradingapplicable, repurposed resources to support our patent enforcement and product sales and support efforts. We ceased sales of our common stock onMilo products in the Capital Marketfourth quarter 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 Nasdaq2019 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 membersare currently focused exclusively on our board of directors (“Board”) with an independent Audit Committeepatent enforcement litigation 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.licensing efforts.
These factors contributed to a lackWe spent much of liquidity which necessitated a change2020 supporting our two patent infringement cases against Qualcomm and others that were scheduled for jury trials in our business plans. Accordingly,Florida 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.2020. As a result of these measures,the COVID-19 pandemic, in 2020, one of those trials was rescheduled for mid-year 2021 and the second was stayed pending the outcome of the first case. In addition, in 2020, we ceased ongoing chip development activities and significantly curtailed our spending for sales and marketingfiled a number of cases in Texas against alleged infringers of our WiFi product line in order to focus our limited resources on our patent enforcement program.
From a patent enforcement standpoint, we spent much of 2018 defending our patents in validity actions filed by defendants in our patent infringement proceedings.patented technologies. See “Legal Proceedings” in Note 1012 to our consolidated financial statements included in Item 8 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.
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 arehave been 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 of $4.0 million in additional proceeds from Brickell to fund our ongoing patent enforcement actions. In addition to Brickell funding, we also funded our operations in 2018 through the sale of approximately $5.3 million incounsel, and various debt and 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 from the sale of additional convertible notes.financings. See “Liquidity and Capital Resources” included in Item 7 for a full discussion of our litigation funding arrangements and our equity and debt financings.
Products
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Milo WiFi Products
Our MiloWe produced and sold consumer WiFi products, did not generateunder the revenue growth that we anticipated in the first half of 2018. 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 salestradename Milo, from 2017 to further decline. We expect to sell or otherwise exit our WiFi product operations in the second quarter of 2019.
Product Offerings
Our Milo-branded WiFi product line isThese products offered a cost-effective networking system that enhancesto enhance WiFi connectivity by effectively distributing the WiFi signal from existing routers and modems throughout a broader coverage area, eliminatingarea. We marketed these products primarily to consumers through Amazon.com and other online outlets, including our own direct-to-consumer online retail site. We ceased sales of these WiFi dead zones and creating a more even distribution 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, introducedproducts 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.2019.
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 selling our Milo WiFi products in the U.S. in 2017 primarily through Amazon.com and our own online store. In 2018, we began expanding our online sales channels to include Walmart.com and NeweggBusiness.com. In addition, we utilized consignment arrangements with a wholesale distributor to 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.
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Production and Supply
To mitigate supply risk, and based on anticipated revenue growth, 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. As a result, in connection with our restructuring in August 2018, we ceased production and recognized impairment charges against our on-hand inventories. RF Technologies
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 our products and, in some cases, require specialty tooling. Our third-party suppliers generally purchase the materials for these components on our behalf on a purchase order basis. Lead times for our component products are generally 60 to 90 days without incurring additional costs for expediting.
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 compete with WiFi networking products offered by companies such as Google, Belkin/Linksys, D-Link, NetGear, Eero (recently purchased by Amazon), and others. We also face competition from service providers who bundle competing networking devices with their service offering. We believe the principal competitive factors in the markets for our networking products include product performance, ease-of-installation, price, and customer support.
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, 2018,2020, we had 134approximately 86 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 20192021 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.
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Employees
As of December 31, 2018,2020, we had 14seven full-time and 2two 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.
We have taken measures to protect our workforce in response to the COVID-19 pandemic, including optional remote worksites for all of our employees beginning in April 2020. Our management, with the oversight of our board of directors, monitors the hiring, retention and management of our employees.
Available Information and Access to Reports
We file annual reports on Forms 10-K, quarterly reports on Forms 10-Q, proxy statements and other reports, including any amendments thereto, electronically with the SEC. The SEC maintains an Internet site (http://www.sec.gov) where these reports may be obtained at no charge. 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.
Corporate Website
We webcast our earnings calls and certain events we participate in or host with members of the investment community in the investor relations section of our website. Additionally, we announce investor information, including news and commentary about our business, financial performance and related matters, SEC filings, notices of investor events, and our press and earnings releases, in the investor relations section of our website (http://ir.parkervision.com). Additionally, if applicable, we webcast our earnings calls and certain events we participate in or host with members of the investment community in the investor relations section of our website. Investors and others can receive notifications of new information posted in the investor relations section in real time by signing up for email alerts and/or RSS feeds. Further corporate governance information, including our governance guidelines, Board committee charters, and code of conduct, is also available in the investor relations section of our website under the heading “Corporate Governance.” The content of our website is not incorporated by reference into this Annual Report or in any other report or document we file with the SEC, and any references to our website are intended to be inactive textual references only.
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In addition to other risks and uncertainties described in this Annual Report, the following risk factors should be carefully considered in evaluating our business because such factors may have a significant impact on our business, operating results, liquidity and financial condition. As a result of the risk factors set forth below, actual results could differ materially from those projected in any forward-looking statements.
Financial and Operating Risks
Our financial condition raises substantial doubt as to our ability to continue as a going concern.
We have had significant losses and negative cash flows in every year since inception, and continue to have an accumulated deficit which, at December 31, 2018,2020, was approximately $392.3$421.4 million. Our net losses for the years ended December 31, 20182020 and 20172019 were approximately $20.9$19.6 million and $19.3$9.5 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, 2018,2020, a statement with respect to substantial doubt about our ability to continue as a going concern. Note 2 to our
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consolidated financial statements included in Item 8 includes a discussion regarding our liquidity and our ability to continue as a going concern. Our consolidated financial statements have been prepared assuming we will continue to operate as a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. If we become unable to continue as a going concern, we may have to liquidate our assets and the values we receive for our assets in liquidation or dissolution could be significantly lower than the values reflected in our consolidated financial statements. The substantial doubt as to our ability to continue as a going concern may adversely affect our ability to negotiate reasonable terms with our 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 securecontinue our current patent enforcement and fulfill any contracts that we achieve for the sale of our productslicensing efforts. Those efforts may not produce a successful financial outcome in 2021, or technologies.at all. Without a successful financial outcome from one or more of our current patent enforcement and licensing efforts, our revenues in 2019we will not bring us to profitability andachieve profitability. Furthermore, our current capital resources willmay not be sufficient to sustain our operations through 2019.2021. If we are not able to generate sufficient revenues or obtain sufficient capital resources, we willmay not be able to implement our business plan or meet our current obligations due within the twelve months after the issuance date of our consolidated financial statements and investors will suffer a loss in their investment. This may also result in a change in our business strategies.
We will need to raise substantial additional capital in the future to fund our operations. Failure to raise such additional capital may prevent us from implementing our business plan as currently formulated.
Because we have 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$1.6 million at December 31, 2018. In addition, we received2020 and proceeds of $1.3approximately $5.6 million inreceived during the first quarter of 20192021 from various debt and equity transactions, including the saleexercise of convertible notes.options and warrants. Although we implemented significant cost reduction measures in August 2018,2019 and 2020, our business plan will continue to require expenditures for patent protection and enforcement and general operations. For the years ended December 31, 20182020 and 2017,2019, we used $10.3$4.8 million and $14.1$3.4 million, respectively in cash for operations which was funded primarily through the sale of convertible debt and equity securities. In addition, we used $3.0 million of the proceeds received during the first quarter of 2021 to repay outstanding obligations to one of our litigation firms. Our current capital resources willmay not be sufficient to meet our working capital needs for the twelve months after the issuance of our consolidated financial statements
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and we willmay require additional capital to fund our operations. Additional capital may be in the form of debt securities, the sale of equity securities, including common or preferred stock, additional litigation funding, or a combination thereof. Failure to raise additional capital willmay have a material adverse impact on our ability to achieve our business objectives.
If we are unsuccessful in executing our cost reduction measures, our business and results of operations may be adversely affected.
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 willmay 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
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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$1.0 million in secured and unsecured notes payable and $1.2$3.9 million in outstanding principal under convertible notes payable at December 31, 2018 and we have an additional $1.3 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”) totaling approximately $336.4$323.2 million at December 31, 2018,2020, of which $323.5$294.1 million is subject to expiration in varying amounts from 20192021 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 saleWe have sold a significant number of additional equity securities may triggerover the relevant lookback period which increases the risk of triggering an ownership change under Section 382 whichfrom the future sale of additional equity securities. An ownership change under Section 382 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 others 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 payment of at least the next $14.7 million in patent-related proceeds received by us. Thereafter, any remaining net proceeds will be prorated between us, our legal counsel, Brickell and Brickell.others will consume all of our initial future proceeds up to specified limits and could exceed half of our proceeds thereafter depending on size and timing of proceeds, among other factors. The long-term continuation of our business plan is dependent upon our ability to secure sufficient financing to support our business, and our ability to generate revenues and/or patent related proceeds sufficient to offset expenses and meet our contingent payment obligation.obligations. Failure to generate revenue or other patent-related proceeds sufficient to repay our contingent obligationobligations may impede our ability to obtain additional financing which will have a material adverse effect on our ability to achieve our long-term business objectives.
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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
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the matter. Unfavorable outcomes could result in exhaustion of our financial resources and could otherwise hinder our ability to pursue licensing and/or product opportunities for our technologies which wouldin the future. Failure to achieve favorable outcomes from one or more of our patent enforcement actions will have a material adverse impact on our financial condition, results of operations, cash flows, and business prospects. We have contingent fee arrangements in place with others to reduce our litigation related expenditures; however any litigation-based or other patent-related amounts collected by us will be subject to contingency payments to our legal counsel and other funding parties which will reduce the amount retained by us.
If our patents and intellectual property rights do not provide us with the anticipated market protections, our competitive position, business, and prospects will be impaired.
We rely on our intellectual property rights, including patents and patent applications, to provide competitive advantage and protect us from theft of our intellectual property. We believe that our patents are for entirely new technologies and that our patents are valid, enforceable and valuable. However, third parties have made claims of invalidity with respect to certain of our patents and other similar claims may be brought in the future. For example, 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 has negatively impacted the timing of our current patent infringement actions as a result of office closures, travel restrictions and court closures. For example, our patent infringement trial in Orlando, Florida has been delayed twice due to the impact of COVID-19. It is possible that further delays in our cases could occur.
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
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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.
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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.
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.
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
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and the financial reporting and regulatory compliance activities that our business requires. These activities are instrumental to the successful execution of our business plan.
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Any disruptions to our information technology systems or breaches of our network security could interrupt our operations, compromise our reputation, and expose us to litigation, government enforcement actions, and costly response measures and could have a material adverse effect on our business, financial condition and results of operations.
We rely on information technology systems, including third-party hosted servers and cloud-based servers, to keep business, financial, and corporate records, communicate internally and externally, and operate other critical functions. If any of our internal systems or the systems of our third-party providers are compromised due to computer virus, unauthorized access, malware, and the like, then sensitive documents could be exposed or deleted, and our ability to conduct business could be impaired. Cyber incidents can result from deliberate attacks or unintentional events. These incidents can include, but are not limited to, unauthorized access to our systems, computer viruses or other malicious code, denial of service attacks, malware, ransomware, phishing, SQL injection attacks, human error, or other events that result in security breaches or give rise to the manipulation or loss of sensitive information or assets. Cyber incidents can be caused by various persons or groups, including disgruntled employees and vendors, activists, organized crime groups, and state-sponsored and individual hackers. Cyber incidents can also be caused or aggravated by natural events, such as earthquakes, floods, fires, power loss, and telecommunications failures. The risk of cybersecurity breach has generally increased as the number, intensity, and sophistication of attempted attacks from around the world has increased. While we have cyber security procedures in place, given the evolving nature of these threats, there can be no assurance that 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, 2018,2020, we had 28.758.6 million shares of common stock outstanding and had outstanding options warrants and restricted stock unitswarrants for the purchase of up to 14.525.1 million additional shares of common stock, of which approximately 9.122.3 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.2020. 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.
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The conversion of outstanding convertible notes into shares of common stock, and the issuance of common stock by us as payment of accrued interest upon the convertible notes, could materially dilute our current stockholders.
We have an aggregate principal amount of $1.2$3.9 million in convertible notes outstanding at December 31, 2018.2020. 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 iswere converted into shares of common stock, we would be required to issue an aggregate of up to 2.723.6 million shares of common stock. In addition, in the first quarter of 2019, we issued an additional aggregate principal amount of $1.3 million in convertible notes which, if converted at the fixed conversion price, would result in the issuance of an additional 5.2 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 2.5 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 make such payments in shares of our common stock to the greatest extent possible. Such interest payments could further dilute our current stockholders.
The price of our common stock may be subject to substantial volatility.
The trading price of our common stock has been and may continue to be volatile. Between January 1, 20172019 and December 31, 2018,March 19, 2021, the reported high and low sales prices for our common stock ranged between $0.13$0.06 and $3.80$1.91 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, in August 2018 immediately following delisting from Nasdaq, under the symbol “PRKR”. The over-the-counter market is a significantly more limited market than a nationally-recognized securities exchange such as Nasdaq, and the quotation of our common stock on the over-the-counter market may resulthas resulted in a less liquid market available for existing and potential stockholders to trade shares of our common stock. Securities traded in the over-the-counter market generally have less liquidity due to factors such as the reduced number of investors that will consider investing in the securities, the reduced number of market makers in the securities, and the reduced number of securities analysts that follow such securities. As a result, holders of shares of our common stock may find it difficult to resell their shares at prices quoted in the market or at all. We may beare also subject to additional compliance requirements under applicable state laws relating to the issuance of our securities. This could have a long-term adverse effect on our ability to raise capital, which ultimately could adversely affect the market price of our common stock. 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.
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Our common stock is classified as a “penny stock” under SEC rules, which means broker-dealers who make a market in our stock will be subject to additional compliance requirements.
Our common stock is deemed to be a "penny stock" as defined in the Securities Exchange Act of 1934 (the “Exchange Act”). Penny stocks are stocks (i) with a price of less than five dollars per share; (ii) that are not traded on a recognized national exchange; (iii) whose prices are not quoted on an automated quotation system sponsored by a recognized national securities association; or (iv) whose issuer has net tangible assets less than $2,000,000 (if the issuer has been in continuous operation for at least three years); or $5,000,000 (if continuous operations for less than three years); or with average revenues of less than $6,000,000 for the last three years. The Exchange Act requires broker-dealers dealing in penny stocks to provide potential investors with a document disclosing the risks of penny stocks and to obtain a manually signed and dated written receipt of the document before effecting any transaction in a penny stock for the investor’s account. Potential investors in our common stock are urged to obtain and read such disclosure carefully before purchasing any shares that are deemed to be “penny stock.” Further, the Exchange Act requires broker-dealers dealing in penny stocks to approve the account of any investor for transactions in such stocks before selling any penny stock to that investor. These procedures require the broker-dealer to (i) obtain from the investor information concerning his, her or its financial situation, investment experience and investment objectives; (ii) reasonably determine, based on that information, that transactions in penny stocks are suitable for the investor, and that the investor has sufficient knowledge and experience as to be reasonably capable of evaluating the risks of penny stock transactions; (iii) provide the investor with a written statement setting forth the basis on which the broker dealer made the determination in (ii) above; and (iv) receive a signed and dated copy of such statement from the investor, confirming that it accurately reflects the investor’s financial situation, investment experience and investment objectives. Compliance with these requirements may affect the ability or willingness of broker-dealers to sell our securities, and accordingly would affect the ability of stockholders to sell their securities in the public market. These additional procedures could also limit our ability to raise additional capital in the future.
We do not currently pay dividends on our common stock and thus stockholders must look to appreciation of our common stock to realize a gain on their investments.
We do not currently pay dividends on our common stock and intend to retain our cash and future earnings, if any, to fund our business plan. Our future dividend policy is within the discretion of our board of directors and will depend upon various factors, including our business, financial condition, results of operations and capital requirements. We therefore cannot offer any assurance that our board of directors will determine to pay special or regular dividends in the future. Accordingly, unless our board of directors determines to pay dividends, stockholders will be required to look to appreciation of our common stock to realize a gain on their investment. There can be no assurance that this appreciation will occur.
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.
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We have a shareholder protection rights plan that may delay or discourage someone from making an offer to purchase the company without prior consultation with the board of directors and management, which may conflict with the interests of some of the shareholders.
On November 17, 2005, as amended on November 20, 2015 and November 20, 2020, 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.
Item 1B. Unresolved Staff Comments.
Not applicable.
OurUntil the expiration of our lease in October 2020, our headquarters arewere located in a 14,0003,000 square foot leased facility in Jacksonville, Florida. Beginning in November 2020, we reverted to remote worksites for all of our employees in light of the pandemic. We believe a remote work environment is currently suitable for the conduct of our business. 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, weWe 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 in Item 8 for information regarding our outstanding lease obligations.
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 in Item 8.
Item 4. Mine Safety Disclosures.
Not applicable.
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Item 5. Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
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, 2019,8, 2021, we had approximately 42109 holders of record and we believe there are approximately 12,0007,200 beneficial holders of our common stock.
Dividends
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. The payment of cash dividends in the future will 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 of directors.
Purchases of Equity Securities by Issuer and Affiliated Purchasers
No purchases of our equity securities have been made by us or affiliated purchasers within the fourth quarter of the fiscal year ended December 31, 2020.
Item 6. Selected Financial Data.
Not applicable.
Item 7. 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 currently have also designedpatent enforcement actions ongoing in various U.S. district courts against providers of mobile handsets, smart televisions and developedother WiFi products and, in certain cases, their chip suppliers for the infringement of a number of our RF patents. We have made significant investments in developing and protecting our technologies, the returns on which are dependent upon the generation of future revenues for realization.
In 2018, we restructured our operations to reduce operating expenses. As part of that restructuring, we made significant reductions in our investment in the development and marketing of a consumer distributed WiFi product line that is being marketed under the brand name Milo.
In August 2018, we implementedMilo®. Our cost reduction measures that
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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,salaries. In early 2019, we ceased substantially all ongoing chipresearch and development activitiesefforts and, significantly curtailedwhere applicable, repurposed resources to support our spending forpatent enforcement and product sales and marketingsupport efforts. We ceased sales of our Milo product lineproducts in order to focus our limited resourcesthe fourth quarter of 2019 and are currently focused exclusively on our patent enforcement program. We expect to sell or otherwise exit the Milo product operations in the second quarter of 2019litigation and intend to focus our resources solely on licensing and enforcement of our wireless technologies.efforts.
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 in Item 8 for a complete discussion of our legal proceedings.
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We have expended significant resources since 2011 and incurred significant debt for the enforcement and defense of our intellectual property rights.
Recent Developments
Equity and Debt Financings
In January 2021, we received aggregate proceeds of approximately $1.0 million from the sale of common stock to accredited investors at a price of $0.35 per share. The securities purchase agreements include contingent payment rights identical to the unsecured contingent payment obligations incurred in 2020 (see “Contingent Payment Obligations” included under Financial Condition). Approximately $0.4 million in proceeds for this transaction was received as of December 31, 2020 and recorded as an accrued liability until the consummation of the transaction. We entered into registration rights agreements with the investors pursuant to which we will register the shares. We have committed to file the registration statement by April 15, 2021 and to cause the registration statement to become effective by June 30, 2021. The registration rights agreements provide for liquidated damages upon the occurrence of certain events including failure by us to file the registration statement or cause it to become effective by the deadlines set forth above. The amount of the liquidated damages is 1.0% of the aggregate subscription upon the occurrence of the event, and monthly thereafter, up to a maximum of 6%, or approximately $0.06 million.
In March 2021, we received aggregate proceeds of approximately $4.2 million from the sale of common stock and warrants to accredited investors at a price of $1.29 per share of common stock. The warrants have an exercise price of $1.75 and expire in March 2026. We entered into registration rights agreements with the investors pursuant to which we will register the shares. We have committed to file the registration statement within 30 days and to cause the registration statement to become effective within 90 days. The registration rights agreements provide for liquidated damages upon the occurrence of certain events including failure by us to file the registration statement or cause it to become effective by the deadlines set forth above. The amount of the liquidated damages is 1.0% of the aggregate subscription upon the occurrence of the event, and monthly thereafter, up to a maximum of 6%, or approximately $0.25 million. The majority of the proceeds from this transaction were used to satisfy our obligations to Mintz (see “Mintz Agreement” below).
Share Based Compensation Arrangements
On January 11, 2021, the Board amended the 2019 Long-Term Incentive Plan to increase the number of shares of common stock reserved for issuance under the 2019 Plan from 12 million to 27 million shares.
The Board also approved grants, under the 2019 Plan, of two-year options, with an exercise price of $0.54 per share, vesting in 8 equal quarterly installments commencing on March 31, 2021 and expiring on
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January 11, 2026. The grants under the 2019 Plan included an option to purchase 8,000,000 shares granted to Jeffrey Parker, an option to purchase 1,000,000 shares granted to Cynthia French, an option to purchase 380,000 shares to each of the three non-employee directors, and options to purchase an aggregate of 2,900,000 shares granted to other key employees.
On January 25, 2021, we amended our business consulting and retention agreement with Chelsea to increase the compensation for services over the remaining term and to extend the term of the agreement through February 2024. As consideration for the amended agreement, we issued 500,000 shares of unregistered common stock in exchange for a nonrefundable retainer for services valued at approximately $0.33 million. The value of the stock issued is being recognized as consulting expense over the term of the agreement.
On March 9, 2021, we granted approximately 32,000 shares under our 2019 Long-Term Incentive Plan to a consultant for business communications services over a one-year term valued at approximately $0.05 million.
Warrant and Option Exercises
During the three months ended March 31, 2021, we received aggregate proceeds of $0. 4 million from the exercise of outstanding options and warrants at an average exercise price of $0.16 per share.
Mintz Agreement
As of December 31, 2020, we had approximately $3.1 million in accounts payable to Mintz and an outstanding balance of approximately $0.03 million on a secured note payable to Mintz for legal fees and expenses. In addition, we had approximately $3.6 million in disputed legal fees and expenses billed by Mintz that we treated as a loss contingency that was not probable as of December 31, 2020 and 2019 and accordingly, for which we recognized no expense in the consolidated financial statements. In March 2021, we entered into an agreement with Mintz to satisfy our outstanding obligations and reduce any future contingency fees payable to Mintz. On March 29, 2021, we paid Mintz a lump-sum payment of $3.0 million in satisfaction of our outstanding obligations to Mintz including the Mintz note, our accounts payable to Mintz, and all disputed and unrecorded billings. Mintz waived all past defaults on the Mintz note and agreed to a significant reduction in future success fees payable to Mintz from patent-related proceeds.
Legal Proceedings
On March 26, 2021, the district court in the Middle District of Florida, Orlando Division, issued an order that, among other things, postponed our trial date in ParkerVision v. Qualcomm citing backlog due to the pandemic as a factor. A new trial date has not yet been set but is unlikely to be scheduled prior to November or December 2021 according to the court.
Liquidity and Capital Resources
At December 31, 2018, we had a working capital deficit of approximately $2.1 million, an increase of approximately $1.9 million compared to our working capital deficit at December 31, 2017. The increase in working capital deficit is largely due to increases in amounts payable to outside litigation firms and a decrease in the carrying value of our inventory and prepaid assets due to impairment charges associated with our August 2018 restructuring.
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, 2018,2020, we incurred a net loss of approximately $20.9$19.6 million and negative cash flows from operations of approximately $4.8 million. At December 31, 2020, we had a working capital deficit of approximately $3.8 million and an accumulated deficit of approximately $392.3$421.4 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 in Item 8 for a discussion of our liquidity and our ability to continue as a going concern.
We used cash for operations
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Our working capital deficit is primarily the result of $10.3approximately $4.1 million in 2018, representing a $3.8accounts payable related to outstanding litigation fees and expenses. Our working capital improved by $1.7 million or 27%, decrease from 2019 to 2020, primarily as the result of the increase in our cash and cash equivalents from debt and equity financings. Our use of cash for operations increased 42%, from $3.4 million in 2017.2019 to $4.8 million in 2020. This decrease in cash usageincrease is primarily the result of a decrease in cash used forincreased legal expenses associated with our patent infringement litigation, largely offset by increased cash usage related to inventory expansion and other costs from the development and launch of our WiFi networking product line.
We have utilized the proceeds from the sale of equity and equity-linked securities and our contingent funding arrangement with Brickell to fund ourenforcement efforts. Our operations including litigation costs. We received net proceeds ofin 2020 were primarily funded through approximately $10.6 million and $14.7 million from equity and debt financings for the years ended December 31, 2018 and 2017, respectively, including an aggregate of $4.0 million and $1.0 million, respectively, received in connection with our contingent funding arrangement with Brickell.
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$6.0 million in proceeds from debt and equity financings, as well as $1.6 million 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 numberthe exercise 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.
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We had cash and cash equivalents totaling approximately $1.5 million at December 31, 2018. In the first quarter of 2019,warrants. Comparatively, we received net proceeds of approximately $3.1 million from debt financings in 2019. We used $1.3 million and $1.2 million in cash to repay outstanding debt obligations in 2020 and 2019, respectively. These debt repayments were primarily related to a secured note payable with Mintz which had an outstanding balance of $0.03 million at December 31, 2020 and was repaid in full in the first quarter of 2021.
At December 31, 2020, we had approximately $0.19 million in current debt obligations, including $0.07 million related to a Paycheck Protection Program loan, which we believe will be forgiven, based on the program criteria. This represents a decrease of $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 million in debt obligations due to be repaid in 2019, an increase from $0.3 million in current debt obligations at December 31, 2017. This increase2019. The decrease in our short-termcurrent debt repayment obligations is primarily the result of $1.2 million in repayments made on the issuanceMintz note in 2020.
We had cash and cash equivalents of a secured promissory noteapproximately $1.6 million at December 31, 2020. We received an additional $5.6 million in proceeds from debt and equity financings and warrant and option exercises in the first quarter of 2021, of which $3.0 million was used to settle outstanding accounts and notes payable for litigation costs. Our remaining capital resources will be used to fund our litigation counsel in 2018current obligations and ongoing operating costs; however these resources may not be sufficient to meet our liquidity needs for unpaid feesthe next twelve months and costs relatedwe may be required to our patent enforcement program. seek additional capital.
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.
Significant portions of our litigation costs to date have been funded by contingent payment arrangements with legal counsel. Fee discounts offered by legal counsel in exchange for contingent payments upon successful outcome in our litigation are not recognized in expense until such time that the related proceeds on which the contingent fees are payable are considered probable. Contingent fees vary based on each firm’s specific fee agreement. We currently have contingent fee arrangements in place for all of our active cases.
In addition to contingent fee arrangements with legal counsel, we have a contingent repayment obligation to Brickell that was recorded at its estimated fair value of $33.1 million at December 31, 2020. Brickell is entitled to a priority, prorated payment of up to 100% of proceeds received by us from funded patent-related actions up to a specified minimum return. Brickell’s minimum return is determined as a multiple of the outstanding funded amount that increases over time. The estimated minimum return due to Brickell if repaid in full at December 31, 2020 is approximately $42 million, an increase of approximately $3 million, or 8%, from the minimum return that would have been due to Brickell as of December 31, 2019. In addition, in 2020 we incurred unsecured contingent payment obligations in connection with various financings. These unsecured contingent payment obligations are recorded at an aggregate estimated fair value of $5.2 million, with a maximum payment obligation of $9.7 million at December 31, 2020.
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Although current working capital will not be used to repay our contingent arrangements, based on our current outstanding legal proceedings, funding arrangements and contingent payment arrangements, we estimate that up to 100% of our initial future proceeds will be used to repay contingent payment arrangements until Brickell’s minimum return has been met. After repayment of Brickell’s minimum return, we estimate that 45% to 65% of estimated future proceeds from current actions could be payable to others, depending on the proceeding and the nature, amount 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 2019,2021, 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.
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$2.2 million and $5.1$2.9 million as of December 31, 20182020 and 2017,2019, 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$0.4 million in patent amortization expense recognized in 2018 combined with minimal cost additions to our intangible assets2020 as our portfolio matures.matures and a $0.3 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, 20182020 and 2017,2019, we incurred losses of approximately $0.1$0.3 million and $0.4 million, respectively, for the write offwrite-off of specific patent assets. These losses are included in operating expenses in the accompanying consolidated statements of comprehensive loss.
Secured Contingent Payment ObligationObligations
We have a secured and unsecured contingent payment obligations recorded at an aggregate estimated fair value of $38.3 million and $26.7 million as of December 31, 2020 and 2019, respectively. These repayment obligations are contingent upon receipt of proceeds from patent enforcement and other patent monetization actions. As a result, we have elected to account for these contingent payment obligations at their estimated fair values which are subject to significant estimates and assumptions as discussed in “Critical Accounting Policies” below. Refer to Note 10 to our consolidated financial statements
18
included in Item 8 for a discussion of the fair value measurement of our contingent payment obligation.
Our secured contingent payment obligation is payable to Brickell was recorded at its estimated fair value of $25.6 million and $15.9 millionunder a 2016 funding agreement, as of December 31, 2018 and 2017, respectively, representing an increase of approximately $9.7 million. This increase is the result of a $4.0 million increaseamended from additional proceeds received from Brickell in 2018 and a $5.7 million increase in the estimated fair value of our repayment
20
obligationtime to Brickell. Under the funding agreement,time. 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 theThe amount of our obligation varies based on the magnitude, timing and nature of proceeds received by us. As a result,
In addition, in 2020, we have electedincurred unsecured contingent payment obligations in connection with various funding arrangements. The contingent payment obligations are payable from our share of patent-related proceeds after satisfaction of our obligation to account for this obligation at its estimated fair value which is subjectBrickell and payment of contingent fees to significant estimates and assumptions as discussed in “Critical Accounting Policies” below. legal counsel.
The $5.7$11.6 million increase in estimated fair value of this repayment obligation in 2018our contingent payment obligations from 2019 to 2020 is primarily the result of (i) additional proceeds received in 2018, (ii) increases in the estimated time frames for repayment of the obligation and (iii) changes in estimated probabilities for the timing and amount of repayments to Brickell. Refer to Note 8 to our consolidated financial statements included in Item 8 for a discussion of the fair value measurement of our contingent payment obligation.
Brickell is entitled to priority payment of 100% of at least the next $14.7$3.2 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 amountnew unsecured payment obligations incurred 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 changean $8.4 million increase 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.
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 exceededcontingent obligations. See “Change in Fair Value of Contingent Obligations” below for a discussion of the $2.5 millionincrease in proceeds received, no value was assigned to the warrants.fair value.
Notes Payable
As of December 31, 2018,2020, we had approximately $3.2$1.0 million in notes payable, including an unsecured promissory note payable to Sterne, Kessler, Goldstein, & Fox, PLLC (“SKGF”), a related party, of approximately $0.8 million, and a secured promissory note payable to Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. (“Mintz”Mintz”) of $2.4$0.03 million, and a loan from the Paycheck Protection Program (PPP) of approximately $0.2 million. 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, weWe were in 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 Mintz note since November 2019 and, accordingly, accrued interest at the default rate. In March 2021, we settled our outstanding obligations with Mintz (as more fully discussed in “Recent Developments”) and Mintz waived all past defaults on the note which has been paid in full. In addition, in March 2021, we started the application process for forgiveness of the same period. PPP loan. Based on the PPP loan forgiveness criteria, we anticipate that we will qualify for forgiveness of the entire principal amount of this loan.
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.
21
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, 2018,2020, we had net deferred tax assets of approximately $98$94 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 in Item 8.
Results of Operations for Each of the Years Ended December 31, 20182020 and 2017
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 2017.2019
Revenues and Gross Margins
We reported no licensing revenue for the years ended December 31, 20182020 or 2017.2019. Although we do anticipate licensing revenue and/or settlement gains to result from our licensing and patent enforcement
19
actions, the amount and timing is highly unpredictable and there can be no assurance that we will achieve our anticipated results.
We reported no product revenue of $0.1 million for each ofduring the yearsyear ended December 31, 20182020 and 2017, respectively,minimal product revenue for the year ended December 31, 2019, from the sales of our Milo-branded products. OurWe discontinued sales of Milo products in the fourth quarter of 2019 and recognized an impairment charge for our remaining inventory, resulting in negative gross margins on Miloour product sales, before impairment charges, were approximately 24% and 25% for the years ended December 31, 2018 and 2017, respectively. Our revenues from Milo products to date have fallen short of our projections, and we have limited resources to deploy towards increasing consumer awareness of our products. As a result, for the year ended December 31, 2018, we recorded $1.1 million in impairment charges to reduce excess inventories to their estimated 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.
22sales.
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.
ResearchThe $0.3 million decrease in research and development costs were approximately $2.9 million for the year ended December 31, 2018 comparedexpenses from 2019 to approximately $4.3 million for the year ended December 31, 2017, representing a decrease of approximately $1.4 million, or 33%. This decrease 2020 is primarily the result of a $0.9$0.2 million decrease in personnel and related costs being repurposed for selling, general and administrative purposes, including a $0.4 million decrease in share-based compensation expense, a $0.4 million decrease in costs related to chip designlitigation support and fabrication,Milo sales and support as well as 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.personnel costs.
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$10.7 million for the year ended December 31, 2018,2020, as compared to approximately $14.1$7.6 million for the year ended December 31, 2017,2019, representing an increase of approximately $3.1 million or 41%. This increase is primarily due to the recognition of $2.2 million in noncash charges upon amendment of equity-related agreements. In addition, we had a $1.3 million increase in litigation expenses primarily related to preparation of the infringement case against Qualcomm and Apple in Florida in early 2020 and a $0.6 million increase in share-based compensation due to executive and Board equity awards granted in August 2019 and the first quarter of 2020. These increases were somewhat offset by a decrease of approximately $3.7$0.3 million or 26%. This decrease isin board compensation expenses due to the resultreversal of prior board compensation expense upon the settlement of previously accrued board fees in exchange for equity based awards in 2020, a decrease of $0.2 million in litigation feesrent and expensesrelated overhead due to the down-sizing of approximately $1.5 million, a decreaseour corporate headquarters in outside consulting fees of approximately $1.4 million, a decrease in share-based compensation expense of approximately $0.8 million,July 2019, and a decrease in other personnel costs, including travel costs,depreciation and amortization of approximately $0.2$0.3 million somewhat offset by an increase in advertising expenseresulting from lower cost bases 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.
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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 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 prepaidfixed 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 inpatents following disposals during 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 million primarily related to reduced personnel, outside marketing consulting and advertising costs related to product marketing, facilities costs, and board and executive compensation. 2020.
Change in Fair Value of Contingent Payment ObligationObligations
Our losses from
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We have elected to measure our secured and unsecured contingent payment obligations at fair value which is based on significant unobservable inputs. We estimated the changes in fair value of our secured contingent payment obligation were approximately $5.7 million and $0.7 million forobligations using a probability-weighted income approach based on the years ended December 31, 2018 and 2017, respectively. See “Financial Condition” above forestimated present value of projected future cash outflows using a discussion of our contingent payment obligation andrisk-adjusted discount rate. Increases or decreases in the factors impacting the changesignificant unobservable inputs could result in significant increases or decreases in fair value.
Adjusted Net Loss and Adjusted Net Loss per Share
Adjusted net loss decreased by approximately $2.2 million, or 14%, forFor the year ended December 31, 2018 compared2020, we recorded an increase in the fair value of our secured and unsecured contingent payment obligations of approximately $8.4 million. The change in fair value estimates are a result of changes in estimated amounts and timing of projected future cash flows primarily due to the same periodpassage of time and changes in 2017. Thethe probabilities of future cash outflows based on the status of the funded actions. In addition, in 2020, increases in fair value resulted from the sharp decrease in adjusted net loss isthe risk-free interest rate used in the calculation as 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 primarilyFederal Reserve lowering rates to stimulate economic activity amidst the result of a 38% increase in our weighted average common shares outstanding along with the decrease in our adjusted net loss.
24COVID-19 pandemic.
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) |
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| 2017 | ||
Net loss |
| $ | (20,869) |
| $ | (19,259) |
Excluded items: |
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Share-based compensation |
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| 1,050 |
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| 2,164 |
Change in fair value of contingent payment obligation |
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| 5,661 |
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| 711 |
Adjusted net loss |
| $ | (14,158) |
| $ | (16,384) |
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The following table presents a reconciliation of our net loss per common share to the non-GAAP measure of adjusted net loss per common share for the years ended December 31, 2018 and 2017, respectively:
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| 2018 |
| 2017 | ||
Basic and diluted net loss per common share |
| $ | (0.85) |
| $ | (1.09) |
Excluded items |
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| 0.27 |
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| 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:
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. During the years ended December 31, 2018 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.
Secured Contingent Payment ObligationObligations
We have accounted for our secured and unsecured contingent repayment obligationpayment obligations as long-term debt. Our repayment obligation isobligations are contingent upon the receipt of proceeds from patent enforcement or other patent monetization actions. We have elected to measure our secured contingent payment obligationobligations at itstheir estimated fair valuevalues based on the variable and contingent nature of the repayment provisions. We have determined that the fair value of our secured and unsecured contingent payment obligationobligations falls within Level 3 in the fair value hierarchy, which involves significant estimates and assumptions including projected future patent-related proceeds and the risk-adjusted rate for discounting future cash flows. 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.obligations.” Refer to Note 810 to our consolidated financial statements included in Item 8 for a discussion of the significant estimates and assumptions used in estimated the fair value of our contingent payment obligation.obligations.
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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”), 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 whichthat 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 PronouncementPronouncements
In August 2020, the FASB issued ASU 2020-06 "Debt - LeasesDebt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity's Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity's Own Equity." This ASU simplifies accounting for convertible instruments by removing major separation models required under current U.S. GAAP. Consequently, more convertible debt instruments will be reported as a single liability instrument with no separate accounting for embedded conversion features. The ASU removes certain settlement
Our facilities21
conditions that are leased under operating leases. Effectiverequired for equity contracts to qualify for the derivative scope exception, which will permit more equity contracts to qualify for the exception. The ASU also simplifies the diluted earnings per share (EPS) calculation in certain areas. The ASU is effective for fiscal years beginning after December 15, 2021 for accelerated filers and for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years, for smaller reporting companies. Early adoption is permitted for fiscal years beginning after December 15, 2020. The ASU provides for a modified retrospective method of adoption whereby the guidance is applied to transactions outstanding at the beginning of the fiscal year of adoption with the cumulative effect of the change being recorded as an adjustment to beginning retained earnings. We plan to adopt ASU 2020-06 as of January 1, 2019, we will adopt Accounting Standards Codification 842, “Leases” which requires the recognition2021. Adoption of right-to-use assets and lease liabilities on the balance sheet for any financing or operating leases with lease terms of more than one year. The new guidance also increases disclosure of key information about leasing arrangements. A modified retrospective transition approach is required for adoption, applying the new standard to all leases existing at the date 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. We intend to elect 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 required under the new standard will not be provided for dates and periods prior to January 1, 2019. We expect the adoption of this new standard to result in the recognition of operating lease right-to-use assets and operating lease liabilities of approximately $0.56 million and $0.61 million, respectively, primarily related to our facilities leases. In addition, adoption of the new standardASU 2020-06 will result in significant new disclosures aboutan increase to our leasing activities.
long-term debt of approximately $0.8 million, a decrease in additional paid-in-capital of approximately $1.1 million and an adjustment to our beginning retained deficit of $0.3 million resulting from the elimination of the previously recognized beneficial conversion feature as a debt discount.
Off-Balance Sheet Transactions
As of December 31, 2018,2020, we had outstanding warrants to purchase 13.312.9 million shares of our common stock. The estimated grant date fair value of these warrants of approximately $1.8$1.7 million is included in shareholders’ deficit in our consolidated balance sheet for the year ended December 31, 2018.2020. The outstanding warrants have an average exercise price of $0.39$0.45 per share and a weighted average remaining life of approximately five3 years.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
Not applicable.
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Item 8. Financial Statements and Supplementary Data.
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Index to Consolidated Financial Statements | ||
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FINANCIAL STATEMENTS: |
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Consolidated Balance Sheets |
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Consolidated Statements of Cash Flows - for the years ended December 31, |
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Notes to Consolidated Financial Statements - December 31, |
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SUPPLEMENTARY DATA: |
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Not applicable |
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27
Report of Independent Registered Public Accounting Firm
Shareholders andTo the Board of Directors
and Shareholders of ParkerVision, Inc.
Jacksonville, Florida
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheetsheets of ParkerVision, Inc. (the “Company”) and its subsidiary as of December 31, 2018,2020 and 2019, and the related consolidated statementstatements of comprehensive loss, shareholders’ deficit and cash flows for each of the year thenyears in the two-year period ended, December 31, 2020, 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 atas of December 31, 2018,2020 and 2019, and the results of their operations and their cash flows for each of the year thenyears in the two-year period ended December 31, 2020 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'sCompany’s management. Our responsibility is to express an opinion on the Company’s consolidatedfinancial statements based on our audit.audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”)(PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our auditaudits in accordance with the standards of the PCAOB and in accordance with auditing standards generally accepted in the United States of America.PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As a part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our auditaudits 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 auditaudits 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 providesaudits provide a reasonable basis for our opinion.
24
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 mattermatter.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
Estimation of fair value of contingent payment obligations
As disclosed in Note 1 of the Company’s consolidated financial statements, the Company accounts for their secured and unsecured contingent payment obligations as long-term debt. Their payment obligations are contingent upon the receipt of proceeds from patent enforcement and/or patent monetization actions. The Company has elected to measure their contingent payment obligations at their estimated fair values. The Company recorded the fair value of their contingent payment obligations at approximately $38,279,000 as of December 31, 2020.
Auditing management’s estimate of the fair value of their contingent payment obligations involved subjective evaluation and high degree of auditor judgement due to significant assumptions involved in estimating the receipt of proceeds from patent enforcement and/or patent monetization actions.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. We obtained an understanding and evaluated the design of internal controls that address the risks of material misstatement relating to recording the contingent payment obligations at fair value. We tested the accuracy and completeness of the underlying data used in calculating the fair value. We evaluated management’s ability to accurately estimate the assumptions used to develop the fair value of the contingent payment obligations. We also involved an independent legal firm to assist in evaluating the reasonableness of the assumptions of future litigation outcomes used by the Company in estimating the receipt of proceeds from patent enforcement and/or patent monetization actions.
/s/ BDO USA, LLP
Certified Public AccountantsMSL, P.A.
We have served as the Company'sCompany’s auditor since 2018.
Jacksonville, Florida2019.
April 1, 2019Fort Lauderdale, Florida
28
Report of Independent Registered Public Accounting Firm
To the Board of Directors and
Shareholders of ParkerVision, Inc.
Opinion on the Financial Statements
We have audited the consolidated balance sheet of ParkerVision, Inc. and its subsidiary (the “Company”) as of December 31, 2017, and the related consolidated statements of comprehensive loss, shareholders’ deficit and cash flows for the year ended December 31, 2017, including 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 as of December 31, 2017, and the results of its operations and its cash flows for the year ended December 31, 2017 in conformity with accounting principles generally accepted in the United States of America.
Substantial Doubt About the Company’s Ability to Continue as a Going Concern
The 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 negative cash flows 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.
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 of these consolidated financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.
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.
/s/PricewaterhouseCoopers LLP
Jacksonville, Florida
March 29, 2018
We served as the Company's auditor from 1999 to 2017.
2925
PARKERVISION, INC.
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2020 AND 2019
|
|
|
|
| |
|
|
|
|
|
|
| 2020 |
| 2019 | ||
CURRENT ASSETS: |
|
|
|
|
|
Cash and cash equivalents | $ | 1,627 |
| $ | 57 |
Prepaid expenses |
| 599 |
|
| 505 |
Other current assets |
| 8 |
|
| 117 |
Total current assets |
| 2,234 |
|
| 679 |
|
|
|
|
|
|
Property and equipment, net |
| 30 |
|
| 70 |
Intangible assets, net |
| 2,170 |
|
| 2,878 |
Operating lease right-of-use assets |
| 10 |
|
| 283 |
Other assets, net |
| 12 |
|
| 16 |
Total assets | $ | 4,456 |
| $ | 3,926 |
|
|
|
|
|
|
CURRENT LIABILITIES: |
|
|
|
|
|
Accounts payable | $ | 4,318 |
| $ | 2,328 |
Accrued expenses: |
|
|
|
|
|
Salaries and wages |
| 19 |
|
| 78 |
Professional fees |
| 128 |
|
| 499 |
Statutory court costs |
| 251 |
|
| 369 |
Other accrued expenses |
| 936 |
|
| 1,081 |
Related party note payable, current portion |
| 100 |
|
| 86 |
Secured note payable, current portion |
| 26 |
|
| 1,222 |
Unsecured notes payable |
| 65 |
|
| 225 |
Operating lease liabilities, current portion |
| 146 |
|
| 250 |
Total current liabilities |
| 5,989 |
|
| 6,138 |
|
|
|
|
|
|
LONG-TERM LIABILITIES: |
|
|
|
|
|
Secured contingent payment obligation |
| 33,057 |
|
| 26,651 |
Unsecured contingent payment obligations |
| 5,222 |
|
| - |
Convertible notes, net |
| 3,018 |
|
| 2,733 |
Related party note payable, net of current portion |
| 703 |
|
| 793 |
Operating lease liabilities, net of current portion |
| 159 |
|
| 305 |
Other long-term liabilities |
| 129 |
|
| 403 |
Total long-term liabilities |
| 42,288 |
|
| 30,885 |
Total liabilities |
| 48,277 |
|
| 37,023 |
|
|
|
|
|
|
COMMITMENTS AND CONTINGENCIES |
|
|
|
|
|
|
|
|
|
|
|
SHAREHOLDERS' DEFICIT: |
|
|
|
|
|
Common stock, $.01 par value, 140,000 and 110,000 shares authorized, 58,591 and 34,097 issued and outstanding at December 31, 2020 and 2019, respectively |
| 586 |
|
| 341 |
Additional paid-in capital |
| 376,954 |
|
| 368,345 |
Accumulated deficit |
| (421,361) |
|
| (401,783) |
Total shareholders' deficit |
| (43,821) |
|
| (33,097) |
Total liabilities and shareholders' deficit | $ | 4,456 |
| $ | 3,926 |
|
|
|
|
|
|
The accompanying notes are an integral part of these consolidated financial statements.
26
PARKERVISION, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
FOR THE YEARS ENDED DECEMBER 31, 20182020 AND 20172019
(in thousands, except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
| 2018 |
| 2017 | ||
CURRENT ASSETS: |
|
|
|
|
|
Cash and cash equivalents | $ | 1,527 |
| $ | 354 |
Restricted cash equivalents |
| - |
|
| 1,000 |
Available-for-sale securities |
| - |
|
| 26 |
Accounts receivable, net of allowance for doubtful accounts of $0 and $3 at December 31, 2018 and 2017, respectively |
| 2 |
|
| 27 |
Inventories, net |
| 98 |
|
| 1,025 |
Prepaid expenses |
| 538 |
|
| 1,002 |
Other current assets |
| 55 |
|
| 9 |
Held for sale assets |
| 65 |
|
| - |
Total current assets |
| 2,285 |
|
| 3,443 |
|
|
|
|
|
|
Property and equipment, net |
| 129 |
|
| 376 |
Intangible assets, net |
| 3,902 |
|
| 5,076 |
Other assets, net |
| 15 |
|
| 15 |
Total assets | $ | 6,331 |
| $ | 8,910 |
|
|
|
|
|
|
CURRENT LIABILITIES: |
|
|
|
|
|
Accounts payable | $ | 655 |
| $ | 678 |
Accrued expenses: |
|
|
|
|
|
Salaries and wages |
| 122 |
|
| 376 |
Professional fees |
| 493 |
|
| 2,054 |
Other accrued expenses |
| 563 |
|
| 238 |
Related party note payable, current portion |
| 37 |
|
| 294 |
Secured note payable |
| 2,400 |
|
| - |
Lease payable, current portion |
| 86 |
|
| - |
Deferred revenue |
| - |
|
| 19 |
Total current liabilities |
| 4,356 |
|
| 3,659 |
|
|
|
|
|
|
LONG-TERM LIABILITIES: |
|
|
|
|
|
Secured contingent payment obligation |
| 25,557 |
|
| 15,896 |
Convertible notes, net |
| 837 |
|
| - |
Related party note payable, net of current portion |
| 799 |
|
| 531 |
Lease payable, net of current portion |
| 91 |
|
| - |
Other long-term liabilities |
| 1 |
|
| 68 |
Total long-term liabilities |
| 27,285 |
|
| 16,495 |
Total liabilities |
| 31,641 |
|
| 20,154 |
|
|
|
|
|
|
COMMITMENTS AND CONTINGENCIES |
|
|
|
|
|
|
|
|
|
|
|
SHAREHOLDERS' DEFICIT: |
|
|
|
|
|
Common stock, $.01 par value, 75,000 and 30,000 shares authorized, 28,677 and 21,222 issued and outstanding at December 31, 2018 and 2017, respectively |
| 287 |
|
| 212 |
Warrants outstanding |
| 1,810 |
|
| 826 |
Additional paid-in capital |
| 364,885 |
|
| 359,141 |
Accumulated deficit |
| (392,292) |
|
| (371,423) |
Total shareholders' deficit |
| (25,310) |
|
| (11,244) |
Total liabilities and shareholders' deficit | $ | 6,331 |
| $ | 8,910 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 2020 |
| 2019 |
| ||
Product revenue | $ | - |
| $ | 74 |
|
|
|
|
|
|
|
|
Cost of sales - product |
| - |
|
| 73 |
|
Loss on impairment of inventory |
| - |
|
| 6 |
|
Gross margin |
| - |
|
| (5) |
|
|
|
|
|
|
|
|
Research and development expenses |
| - |
|
| 334 |
|
Selling, general, and administrative expenses |
| 10,664 |
|
| 7,602 |
|
Total operating expenses |
| 10,664 |
|
| 7,936 |
|
|
|
|
|
|
|
|
Interest and other income |
| - |
|
| 3 |
|
Interest and other expense |
| (547) |
|
| (421) |
|
Change in fair value of contingent payment obligations |
| (8,367) |
|
| (1,094) |
|
Total interest and other |
| (8,914) |
|
| (1,512) |
|
|
|
|
|
|
|
|
Net loss before income tax |
| (19,578) |
|
| (9,453) |
|
|
|
|
|
|
|
|
Income tax expense |
| - |
|
| - |
|
|
|
|
|
|
|
|
Net loss |
| (19,578) |
|
| (9,453) |
|
|
|
|
|
|
|
|
Other comprehensive income, net of tax |
| - |
|
| - |
|
|
|
|
|
|
|
|
Comprehensive loss | $ | (19,578) |
| $ | (9,453) |
|
|
|
|
|
|
|
|
Basic and diluted net loss per common share | $ | (0.42) |
| $ | (0.30) |
|
|
|
|
|
|
|
|
Weighted average common shares outstanding |
| 47,019 |
|
| 31,461 |
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these consolidated financial statements.
27
PARKERVISION, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ DEFICIT
FOR THE YEARS ENDED DECEMBER 31, 2020 AND 2019
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Common Stock, Par Value |
|
| Additional Paid-in Capital |
| Accumulated |
| Total | |||
Balance as of December 31, 2018 |
| $ | 287 |
|
| 366,695 |
|
| (392,292) |
|
| (25,310) |
Cumulative effect of change in accounting principle |
|
| - |
|
| - |
|
| (38) |
|
| (38) |
Issuance of common stock upon exercise of warrants |
|
| 29 |
|
| - |
|
| - |
|
| 29 |
Issuance of common stock and warrants for services |
|
| 6 |
|
| 234 |
|
| - |
|
| 240 |
Issuance of convertible debt with beneficial conversion feature |
|
| - |
|
| 550 |
|
| - |
|
| 550 |
Issuance of common stock upon conversion and payment of interest in kind on convertible debt |
|
| 19 |
|
| 277 |
|
| - |
|
| 296 |
Share-based compensation, net of shares withheld for taxes |
|
| - |
|
| 589 |
|
| - |
|
| 589 |
Net loss for the year |
|
| - |
|
| - |
|
| (9,453) |
|
| (9,453) |
Balance as of December 31, 2019 |
|
| 341 |
|
| 368,345 |
|
| (401,783) |
|
| (33,097) |
Issuance of common stock and warrants in private offerings, net of issuance costs |
|
| 148 |
|
| 4,618 |
|
|
|
|
| 4,766 |
Issuance of common stock upon exercise of warrants |
|
| 45 |
|
| 1,530 |
|
| - |
|
| 1,575 |
Issuance of common stock and warrants for services |
|
| 7 |
|
| 297 |
|
| - |
|
| 304 |
Issuance of convertible debt with beneficial conversion feature |
|
| - |
|
| 173 |
|
| - |
|
| 173 |
Issuance of common stock upon conversion and payment of interest in kind on convertible debt |
|
| 15 |
|
| 437 |
|
| - |
|
| 452 |
Issuance of common stock upon conversion of short-term loans and payables |
|
| 22 |
|
| 318 |
|
| - |
|
| 340 |
Share-based compensation, net of shares withheld for taxes |
|
| 8 |
|
| 1,236 |
|
| - |
|
| 1,244 |
Net loss for the year |
|
| - |
|
| - |
|
| (19,578) |
|
| (19,578) |
Balance as of December 31, 2020 |
| $ | 586 |
| $ | 376,954 |
| $ | (421,361) |
| $ | (43,821) |
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these consolidated financial statements.
28
PARKERVISION, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2020 AND 2019
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
| 2020 |
| 2019 | ||
CASH FLOWS FROM OPERATING ACTIVITIES: |
|
|
|
|
|
Net loss | $ | (19,578) |
| $ | (9,453) |
Adjustments to reconcile net loss to net cash used in |
|
|
|
|
|
Depreciation and amortization |
| 632 |
|
| 835 |
Share-based compensation |
| 1,244 |
|
| 589 |
Noncash lease expense |
| 61 |
|
| 280 |
Change in fair value of contingent payment obligation |
| 8,367 |
|
| 1,094 |
Loss on disposal/impairment of equipment and other assets |
| 487 |
|
| 412 |
Noncash expense for amendment of equity-related agreements |
| 2,211 |
|
| - |
Inventory impairment charges |
| - |
|
| 6 |
Changes in operating assets and liabilities: |
|
|
|
|
|
Accounts receivable |
| - |
|
| 2 |
Finished goods inventories |
| - |
|
| 81 |
Prepaid expenses and other assets |
| 292 |
|
| 221 |
Accounts payable and accrued expenses |
| 1,757 |
|
| 2,790 |
Operating lease liabilities |
| (250) |
|
| (230) |
Total adjustments |
| 14,801 |
|
| 6,080 |
Net cash used in operating activities |
| (4,777) |
|
| (3,373) |
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES: |
|
|
|
|
|
Proceeds from sale of property and equipment |
| 2 |
|
| 30 |
Purchases of property and equipment |
| (3) |
|
| (5) |
Payments for patent costs and other intangible assets |
| - |
|
| (18) |
Net cash (used in)/provided by investing activities |
| (1) |
|
| 7 |
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES: |
|
|
|
|
|
Net proceeds from issuance of common stock and contingent payment rights in private offerings |
| 4,801 |
|
| - |
Net proceeds from exercise of warrants |
| 1,575 |
|
| 29 |
Net proceeds from debt financings |
| 1,244 |
|
| 3,068 |
Debt repayments |
| (1,272) |
|
| (1,200) |
Principal payments on finance lease obligation |
| - |
|
| (1) |
Net cash provided by financing activities |
| 6,348 |
|
| 1,896 |
|
|
|
|
|
|
NET CHANGE IN CASH AND CASH EQUIVALENTS |
| 1,570 |
|
| (1,470) |
CASH AND CASH EQUIVALENTS, beginning of year |
| 57 |
|
| 1,527 |
CASH AND CASH EQUIVALENTS, end of year | $ | 1,627 |
| $ | 57 |
|
|
|
|
|
|
SUPPLEMENTAL CASH FLOW INFORMATION: |
|
|
|
|
|
Cash paid for interest | $ | 61 |
| $ | 4 |
Cash paid for income taxes | $ | - |
| $ | - |
|
|
|
|
|
|
The accompanying notes are an integral part of these consolidated financial statements.
3029
PARKERVISION, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
FOR THE YEARS ENDED DECEMBER 31, 2018 AND 2017
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 2018 |
| 2017 |
| ||
Licensing revenue | $ | - |
| $ | - |
|
Product revenue |
| 135 |
|
| 100 |
|
Total revenue |
| 135 |
|
| 100 |
|
|
|
|
|
|
|
|
Cost of sales - licensing |
| - |
|
| - |
|
Cost of sales - product |
| 103 |
|
| 75 |
|
Loss on impairment of inventory |
| 1,134 |
|
| 125 |
|
Gross margin |
| (1,102) |
|
| (100) |
|
|
|
|
|
|
|
|
Research and development expenses |
| 2,875 |
|
| 4,344 |
|
Selling, general, and administrative expenses |
| 10,427 |
|
| 14,061 |
|
Restructuring expenses |
| 690 |
|
| - |
|
Total operating expenses |
| 13,992 |
|
| 18,405 |
|
|
|
|
|
|
|
|
Interest and other income |
| 2 |
|
| 26 |
|
Interest and other expense |
| (116) |
|
| (69) |
|
Change in fair value of contingent payment obligation |
| (5,661) |
|
| (711) |
|
Total interest and other |
| (5,775) |
|
| (754) |
|
|
|
|
|
|
|
|
Net loss before income tax |
| (20,869) |
|
| (19,259) |
|
|
|
|
|
|
|
|
Income tax expense |
| - |
|
| - |
|
|
|
|
|
|
|
|
Net loss |
| (20,869) |
|
| (19,259) |
|
|
|
|
|
|
|
|
Other comprehensive income, net of tax |
| - |
|
| - |
|
|
|
|
|
|
|
|
Comprehensive loss | $ | (20,869) |
| $ | (19,259) |
|
|
|
|
|
|
|
|
Basic and diluted net loss per common share | $ | (0.85) |
| $ | (1.09) |
|
|
|
|
|
|
|
|
Weighted average common shares outstanding |
| 24,429 |
|
| 17,688 |
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these consolidated financial statements.
31
PARKERVISION, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ DEFICIT
FOR THE YEARS ENDED DECEMBER 31, 2018 AND 2017
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Common Stock, Par Value |
|
| Warrants |
| Additional |
| Accumulated |
| Total | |||||
Balance as of December 31, 2016 |
| $ | 132 |
|
| $ | 826 |
| $ | 343,087 |
| $ | (352,164) |
| $ | (8,119) |
Issuance of common stock and warrants in public and private offerings, net of issuance costs |
|
| 73 |
|
|
| - |
|
| 13,606 |
|
| - |
|
| 13,679 |
Issuance of common stock for services |
|
| 3 |
|
|
| - |
|
| 422 |
|
| - |
|
| 425 |
Share-based compensation, net of shares withheld for taxes |
|
| 4 |
|
|
| - |
|
| 2,026 |
|
| - |
|
| 2,030 |
Comprehensive loss for the year |
|
| - |
|
|
| - |
|
| - |
|
| (19,259) |
|
| (19,259) |
Balance as of December 31, 2017 |
|
| 212 |
|
|
| 826 |
|
| 359,141 |
|
| (371,423) |
|
| (11,244) |
Issuance of common stock and warrants in public and private offerings, net of issuance costs |
|
| 45 |
|
|
| 1,950 |
|
| 3,281 |
|
| - |
|
| 5,276 |
Exercise of warrants |
|
| 20 |
|
|
| (475) |
|
| 455 |
|
| - |
|
| - |
Expiration of warrants |
|
| - |
|
|
| (491) |
|
| 491 |
|
| - |
|
| - |
Issuance of convertible debt with beneficial conversion feature |
|
| - |
|
|
| - |
|
| 442 |
|
| - |
|
| 442 |
Issuance of common stock upon conversion and payment of interest in kind on convertible debt |
|
| 4 |
|
|
| - |
|
| 52 |
|
| - |
|
| 56 |
Share-based compensation, net of shares withheld for taxes |
|
| 6 |
|
|
| - |
|
| 1,023 |
|
| - |
|
| 1,029 |
Comprehensive loss for the year |
|
| - |
|
|
| - |
|
| - |
|
| (20,869) |
|
| (20,869) |
Balance as of December 31, 2018 |
| $ | 287 |
|
| $ | 1,810 |
| $ | 364,885 |
| $ | (392,292) |
| $ | (25,310) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these consolidated financial statements.
32
PARKERVISION, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2018 AND 2017
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
| 2018 |
| 2017 | ||
CASH FLOWS FROM OPERATING ACTIVITIES: |
|
|
|
|
|
Net loss | $ | (20,869) |
| $ | (19,259) |
Adjustments to reconcile net loss to net cash used in |
|
|
|
|
|
Depreciation and amortization |
| 1,209 |
|
| 1,301 |
Share-based compensation |
| 1,050 |
|
| 2,164 |
Loss on disposal of equipment and other assets |
| 489 |
|
| 85 |
Write down of obsolete inventory |
| 1,134 |
|
| 125 |
Realized gain on available-for-sale securities |
| - |
|
| (9) |
Changes in fair value of contingent payment obligation |
| 5,661 |
|
| 711 |
Changes in operating assets and liabilities: |
|
|
|
|
|
Accounts receivable |
| 25 |
|
| (26) |
Inventories |
| (207) |
|
| (980) |
Prepaid expenses and other |
| 62 |
|
| 84 |
Accounts payable and accrued expenses |
| 1,034 |
|
| 1,744 |
Lease payable |
| 115 |
|
| - |
Total adjustments |
| 10,572 |
|
| 5,199 |
Net cash used in operating activities |
| (10,297) |
|
| (14,060) |
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES: |
|
|
|
|
|
Purchase of available-for-sale securities |
| - |
|
| (4,813) |
Proceeds from redemption of available-for-sale securities |
| 26 |
|
| 4,810 |
Proceeds from sale of assets |
| 50 |
|
| 18 |
Purchases of property and equipment |
| (5) |
|
| (252) |
Payments for patent costs and other intangible assets |
| (16) |
|
| (61) |
Net cash provided by (used in) investing activities |
| 55 |
|
| (298) |
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES: |
|
|
|
|
|
Net proceeds from issuance of common stock and warrants |
|
|
|
|
|
in public and private offerings |
| 5,276 |
|
| 13,679 |
Net proceeds from debt financings |
| 5,294 |
|
| 1,000 |
Shares withheld for payment of taxes |
| (21) |
|
| (134) |
Debt repayments |
| (132) |
|
| - |
Principal payments on capital lease obligation |
| (2) |
|
| (2) |
Net cash provided by financing activities |
| 10,415 |
|
| 14,543 |
|
|
|
|
|
|
NET CHANGE IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH EQUIVALENTS |
| 173 |
|
| 185 |
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH EQUIVALENTS, beginning of year |
| 1,354 |
|
| 1,169 |
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH EQUIVALENTS, end of year | $ | 1,527 |
| $ | 1,354 |
|
|
|
|
|
|
SUPPLEMENTAL CASH FLOW INFORMATION: |
|
|
|
|
|
Cash paid for interest | $ | 39 |
| $ | 69 |
Cash paid for income taxes | $ | - |
| $ | - |
SUPPLEMENTAL SCHEDULE OF NON-CASH ACTIVITIES: |
|
|
|
|
|
Payment of interest in kind on convertible notes | $ | 26 |
| $ | - |
Purchase of equipment under capital lease | $ | - |
| $ | 6 |
|
|
|
|
|
|
The accompanying notes are an integral part of these consolidated financial statements.
33
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 20182020 and 20172019
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 and software technologies and products. We have designed and developed proprietary radio frequency (“RF”) technologies for use in semiconductor circuits for wireless communication products. 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 have also designed and developed a consumer distributed WiFi product line that is being marketed under the brand name Milo®.
We restructured our operations during the third quarter of 2018 in order to reduce operating expenses in light of our limited capital resources. As a result, our primary business is to support and defend the investments we have made in developing and protecting our technologies by focusing on our patent enforcement program. We have determined that our business currently operates under a single operating and reportable segment.
We have designed and developed proprietary radio frequency (“RF”) technologies and integrated circuits for use in wireless communication products. We have expended significant financial and other resources to research and develop our RF technologies and to obtain patent protection for those technologies in the United States of America (“U.S.”) and certain foreign jurisdictions. We believe certain patents protecting our proprietary technologies have been broadly infringed by others, and therefore the primary focus of our business plan is the enforcement of our intellectual property rights through patent infringement litigation and licensing efforts. We currently have patent enforcement actions ongoing in various U.S. district courts against providers of mobile handsets, smart televisions and other WiFi products and, in certain cases, their chip suppliers for the infringement of a number of our RF patents. We have made significant investments in developing and protecting our technologies, the returns on which are dependent upon the generation of future revenues for realization.
In 2018, we restructured our operations to reduce operating expenses. As part of that restructuring, we made significant reductions in our investment in the development and marketing of a consumer distributed WiFi product line marketed under the brand name Milo®. 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 fourth quarter of 2019 and are currently focused exclusively on our patent enforcement litigation and licensing efforts.
Basis of Presentation
Our consolidated financial statements are prepared in accordance with generally accepted accounting principles in the United States of AmericaU.S. (“GAAP”GAAP”). Certain reclassifications have been made to prior period amounts to conform to the current period presentation. The consolidated financial statements include the accounts of ParkerVision, Inc. and our wholly-owned German subsidiary, ParkerVision GmbH, after elimination of all intercompany transactions and accounts.
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,obligations, the volatility and estimated lives of share-based awards used in the estimate of the fair market value of share-based compensation, the assessment of recoverability of long-lived assets, the amortization periods for intangible and long-lived assets, and the valuation allowance for deferred taxes. Actual results could differ from the estimates made. We periodically evaluate estimates used in the preparation of the financial statements for continued reasonableness. Appropriate adjustments, if any, to the estimates used are made prospectively based upon such periodic evaluation.
30
Cash and Cash Equivalents and Restricted Cash Equivalents
We consider cash and cash equivalents to include cash on hand, interest-bearing deposits, overnight repurchase agreements and investments with original maturities of three months or less when purchased. Restricted cash equivalents represent money market investments that are restricted for specific use in payment of legal fees and expenses related to certain of our patent infringement actions. The restricted money market investments have weighted average maturities of three months or less when purchased and are recorded at fair value. We have determined that the fair value of our restricted money market investments fall within Level 1 in the fair value hierarchy (see Note 8).
34
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. All remaining inventory was disposed of during the year ended December 31, 2020.
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:
|
|
|
|
Manufacturing and office equipment | 5-7 years |
Leasehold improvements | Shorter of useful life or remaining life of lease |
Furniture and fixtures | 7 years |
Computer equipment and software | 3-5 years |
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
We capitalize outside legal costs and agency filing fees incurred in connection with securing the rights to our intellectual property. Patents, copyrights and other intangible assets are amortized using the straight-line method over their estimated period of benefit. We estimate the economic lives of our patents and copyrights to be fifteen to twenty years. We estimate the economic lives of other intangible assets, including licenses, based on estimated technological obsolescence, to be two to five years, which is generally shorter than the contractual lives. Management evaluates the recoverability of intangible assets periodically and takes into 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 will, from time to time, abandon a particular patent if we determine fees to maintain the patent exceed its expected recoverability. The cost and accumulated amortization of abandoned intangible assets are removed from their respective accounts, and any resulting net loss is recognized in selling, general and administrative expenses in the accompanying consolidated statements of comprehensive loss.
Secured Contingent Payment ObligationObligations
We have accounted for our secured and unsecured contingent repayment obligationpayment obligations as long-term debt in accordance with Accounting Standards Codification (“ASC”) 470-10-25, “Sales of Future Revenues or Various other Measures of Income.” Our repaymentpayment obligations are contingent upon the receipt of proceeds from patent enforcement and/or patent monetization actions. We have elected to measure our secured contingent payment obligationobligations at itstheir estimated fair valuevalues in accordance with ASC 825, “Financial Instruments” based on the variable and contingent nature of the repayment provisions. We have determined that the fair
31
value of our secured and unsecured contingent payment obligationobligations falls within Level 3 in the fair value hierarchy, which involves significant estimates, and assumptions including projected future patent-related proceeds and the risk-adjusted rate for discounting future cash flows (see Note 8)10). Actual results could differ from the estimates made. Changes in fair value, including the component related to imputed interest, are included in the accompanying consolidated statements of comprehensive loss under the heading “Change in fair value of contingent payment obligation”.obligations.”
35
Leases
Our facilities are leased under operating leases. For those leases that contain rent escalations or rent concessions, we record the total rent payable during the lease term on a straight-line basis over the term of the lease with the difference between the rents paid and the straight-line rent recorded as a deferred rent liability in the accompanying consolidated balance sheets.
In February 2016, the FASB establishedWe adopted ASC 842, “Leases” by issuing ASU 2016-02 to increase transparency and comparability among organizations by recognizingas of January 1, 2019 which requires the recognition of lease right-of-use (“ROU”) assets and lease liabilities on theour consolidated 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 expedientssheets for adoption of ASC 842. Under the new guidance, a lessee will be required to recognize assets and liabilities for capitalfinance and operating leases with initial lease terms of more than 12 months. ASC 842 is effective for interim and annual periods beginning after December 15, 2018. A 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.
ASC 842 will be effective for us as of January 1, 2019, and we haveWe elected to use the effective date as the initial application date. Consequently, financial information will not be updated and the disclosures required under the new standard will not be provided for dates and period prior to January 1, 2019. The new standardASC 842 provides a number of practical expedients in transition and we expect to electelected the package of practical expedients which permits us not to reassess under the new standard our prior conclusions about lease identification, lease classification and treatment of initial direct costs. We expect theThe adoption of this new standard to resultresulted in the recognition of operating lease right-to-useROU assets and operating lease liabilities of approximately $0.56 million and $0.61$0.60 million, respectively, primarily related to our facilities leases. In addition, adoptionRefer to Note 8 for additional disclosures related to our leases.
At inception of a lease, 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.
For operating leases with terms greater than 12 months, we record the ROU asset and lease obligation at the present value of lease payments over the 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. Certain 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. We do not recognize ROU assets and lease liabilities for leases with terms at inception of twelve months or less.
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 new standardminimum 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.
Convertible Debt
We have issued debt that is convertible, at the holder’s option, into shares of our common stock at fixed conversion prices. Certain of the convertible notes were issued with conversion prices that were below market value of our common stock on the closing date resulting in a beneficial conversion feature which we recorded to equity with a corresponding discount to the debt. The discount is amortized over the life of the notes as interest expense.
In August 2020, the Financial Accounting Standards Board issued ASU 2020-06 "Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity's Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity's Own Equity." This ASU simplifies accounting for convertible instruments by removing major separation models required under current U.S. GAAP. Consequently, more convertible debt instruments will be
32
reported as a single liability instrument with no separate accounting for embedded conversion features. The ASU removes certain settlement conditions that are required for equity contracts to qualify for the derivative scope exception, which will permit more equity contracts to qualify for the exception. The ASU also simplifies the diluted earnings per share (EPS) calculation in certain areas. The ASU is effective for fiscal years beginning after December 15, 2021 for accelerated filers and for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years, for smaller reporting companies. Early adoption is permitted for fiscal years beginning after December 15, 2020. The ASU provides for a modified retrospective method of adoption whereby the guidance is applied to transactions outstanding at the beginning of the fiscal year of adoption with the cumulative effect of the change being recorded as an adjustment to beginning retained earnings.
We plan to adopt ASU 2020-06, using the modified retrospective method, as of January 1, 2021. Adoption of ASU 2020-06 will result in significant new disclosures aboutan increase to our leasing activities. long-term debt of approximately $0.8 million, a decrease in additional paid-in-capital of approximately $1.1 million, and an adjustment to our beginning retained deficit of $0.3 million resulting from the elimination of the previously recognized beneficial conversion feature as a debt discount.
Revenue Recognition
As of January 1, 2018, we adoptedWe account for revenue under 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 expect to derive future revenue from licensing of our intellectual property and settlements from patent infringement disputes and sales of products.disputes. 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.
36
Shipping and Handling Costs
Shipping and handling costs related to product sales forFor the yearsyear ended December 31, 20182019, we recognized revenue from the sale of products. For product sales, the performance obligation is generally met at the time product is delivered to the customer. Estimated product returns are deducted from revenue and 2017 were approximately $12,000recorded as a liability. Revenue from the sale of our products includes shipping and $5,000, respectively. These costs are included in selling, generalhandling charged to the customer. Product revenue is recorded net of sales tax collected from customers, discounts, and administrative expenses in the accompanying consolidated statements of comprehensive loss.
Advertising Expense
Advertising costs are expensed as incurred. Advertising expenses of approximately $0.7 millionactual and $0.4 million for the years ended December 31, 2018 and 2017, respectively, are included in selling, general, and administrative expenses in the accompanying consolidated statements of comprehensive loss.estimated future returns.
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.
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
33
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 12.14. Estimates of fair value are not intended to predict actual future events or the value ultimately realized by persons who receive equity awards. We account for forfeitures of share-based awards as they occur.
As of January 1, 2018,2019, we adopted ASU No. 2017-09, “Compensation2018-07, "Compensation - Stock Compensation (Topic 718): ScopeImprovements 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. At the time 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 guidancewe did not have a material effect onany 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.
On December 22, 2017,As of January 1, 2019, we adopted 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 ActAct. We have no stranded tax effects included in our other comprehensive loss and therefore the adoption of 2017 (the “Tax Act”) was signed into law making significant changes to the Internal Revenue Code. Changes include, but areASU 2018-02 did not limited to, a corporate tax rate decrease to 21% effective for tax years beginning after December 31, 2017.impact our consolidated financial statements.
37
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.
The number of shares underlying outstanding options, warrants, unvested RSUSRSUs, and convertible notes at December 31, 20182020 and 20172019 were as follows (in thousands):
|
|
|
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
| ||
| 2018 |
| 2017 | 2020 |
| 2019 | ||||
Options outstanding |
| 1,228 |
|
| 1,007 |
| 12,240 |
|
| 11,410 |
Warrants outstanding |
| 13,279 |
| 420 |
| 12,850 |
| 12,150 | ||
Unvested RSUs |
| 14 |
| 521 |
| 187 |
| - | ||
Shares underlying convertible notes |
| 2,746 |
|
| - |
| 23,557 |
|
| 20,846 |
|
| 17,267 |
|
| 1,948 |
| 48,834 |
|
| 44,406 |
|
|
|
|
|
|
|
|
|
|
|
These potential shares were excluded from the computation of diluted loss per share as their effect would have been anti-dilutive.
34
2. LIQUIDITY AND GOING CONCERN
The accompanying consolidated financial statements as of and for the year ended December 31, 20182020 were prepared assuming we will continue as a going concern, which contemplates that we will continue in operation and will be able to realize our assets and settle our liabilities and commitments in the normal course of business for a period of at least one year from the issuance date of these consolidated financial statements. These consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that could result should we be unable to continue as a going concern.
We have incurred significant losses from operations and negative cash flows in every year since inception and have utilized the proceeds from the sales of our equity 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, 2018,2020, we incurred a net loss of approximately $20.9$19.6 million and negative cash flows from operations of approximately $10.3$4.8 million. At December 31, 2018,2020, we had a working capital deficit of approximately $2.1$3.8 million and an accumulated deficit of approximately $392.3$421.4 million. These circumstances raise substantial doubt about our ability to continue to operate as a going concern for a period of one year after the issuance date of these consolidated financial statements.
At December 31, 2018, weWe had cash and cash equivalents of approximately $1.5 million. In addition, during$1.6 million at December 31, 2020. We received an additional $5.6 million in proceeds from debt and equity financings and warrant and option exercises in the first quarter of 2019,2021, of which $3.0 million was used to settle outstanding accounts and notes payable for litigation costs (see Note 17). Our remaining capital resources will be used to fund our current obligations and ongoing operating costs; however these resources may not be sufficient to meet our liquidity needs for the next twelve months and we received net proceeds of approximately $1.3 million from the issuance ofmay be required to seek additional convertible debt securities. In August 2018, we implemented cost reduction measures and ceased ongoing chip development activities and significantly curtailed our spending for sales and marketing of our WiFi product line in order to focus our limited resourcescapital.
Our business plan is currently focused solely on our patent enforcement program. We expect to sell or otherwise exit the Milo product operations the second quarterand technology licensing objectives. The timing and amount of 2019 and intend to focus our resources solely on licensing and enforcement of our wireless technologies. However, although we may receive proceeds from our patent enforcement actions in 2019, the timing and amount of such proceeds, if any, are difficult to predict and there can be no assurance we will receive any proceeds from these enforcement actions. In addition, we have approximately $2.4 million in debt obligations due to be repaid in 2019.
38
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 to legal counsel; and/orand (ii) our ability to raise additional capital from the sale of debt or equity securities or other financing arrangements. We anticipate that we will continue to invest in patent protection, and licensing, and enforcement of our wireless technologies. We expect that revenue generated from patent enforcement actions, and technology licenses over the twelve months after the issuance date of these financial statements, if any, after deduction of payment obligations to Brickellour third-party litigation funder and legal counsel, may not be sufficient to cover our operating expenses. In the event we do not generate revenues, or other patent-asset proceeds, sufficient to cover our operational costs and contingent repayment obligation, we will be required to raise additional working capital through the sale of equity securities or other financing arrangements.
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.
35
3. INVENTORIES
Inventories consistedAs of the following at December 31, 2018 and 2017 (in thousands):2019, we had $0.55 million in finished goods inventories that were fully offset by an inventory reserve. All of our remaining inventories were disposed of in 2020.
|
|
|
|
|
|
|
|
|
|
|
|
| 2018 |
| 2017 | ||
Raw materials | $ | 139 |
| $ | 573 |
Work-in-process |
| - |
|
| - |
Finished goods |
| 941 |
|
| 452 |
|
| 1,080 |
|
| 1,025 |
Inventory reserves |
| (982) |
|
| - |
|
| 98 |
|
| 1,025 |
|
|
|
|
|
|
During the years ended December 31, 2018 and 2017, we recognized impairment charges to reduce our excess and obsolete inventories to their net realizable values. The following table provides a reconciliation of our inventory reserves for the years ended December 31, 20182020 and 2017,2019, respectively (in thousands):
|
|
|
|
|
|
|
|
| ||||
|
|
|
|
| ||||||||
|
| 2018 |
| 2017 |
| 2020 |
| 2019 | ||||
Inventory reserves at beginning of year |
| $ | - |
| $ | - |
| $ | 550 |
| $ | 982 |
Impairment charges |
| 1,134 |
| 125 |
| - |
| 6 | ||||
Write down of impaired inventories |
|
| (152) |
|
| (125) |
| - |
| (438) | ||
Disposal of inventory |
|
| (550) |
|
| - | ||||||
Inventory reserves at end of year |
| $ | 982 |
| $ | - |
| $ | - |
| $ | 550 |
|
|
|
|
|
|
|
|
|
|
|
|
|
39
4. PREPAID EXPENSES
Prepaid expenses consisted of the following at December 31, 20182020 and 20172019 (in thousands):
|
|
|
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
| ||
| 2018 |
| 2017 | 2020 |
| 2019 | ||||
Prepaid services | $ | 252 |
| $ | 253 | $ | 408 |
| $ | 221 |
Prepaid bonds for German statutory costs |
| 199 |
| 62 |
| 142 |
| 188 | ||
Prepaid insurance |
| 21 |
| 62 | ||||||
Prepaid licenses, software tools and support |
| 51 |
| 404 |
| 11 |
| 17 | ||
Prepaid inventory and production tooling |
| - |
| 121 | ||||||
Prepaid advertising |
| - |
| 75 | ||||||
Prepaid insurance |
| 19 |
| 54 | ||||||
Other prepaid expenses |
| 17 |
|
| 33 |
| 17 |
|
| 17 |
| $ | 538 |
| $ | 1,002 | $ | 599 |
| $ | 505 |
|
|
|
|
|
|
|
|
|
|
|
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 13).
5. PROPERTY AND EQUIPMENT, NET
Property and equipment, at cost, consisted of the following at December 31, 20182020 and 20172019 (in thousands):
|
|
|
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
| ||
| 2018 |
| 2017 | 2020 |
| 2019 | ||||
Equipment and software, including equipment purchased under capital leases of $17 and $297 at December 31, 2018 and 2017, respectively | $ | 1,555 |
| $ | 6,556 | |||||
Equipment and software | $ | 218 |
| $ | 260 | |||||
Leasehold improvements |
| 786 |
| 786 |
| 19 |
| 33 | ||
Furniture and fixtures |
| 182 |
|
| 185 |
| 30 |
|
| 43 |
|
| 2,523 |
|
| 7,527 |
| 267 |
|
| 336 |
Less accumulated depreciation, including accumulated depreciation for equipment purchased under capital leases of $13 and $206 at December 31, 2018 and 2017, respectively |
| (2,394) |
|
| (7,151) | |||||
Less accumulated depreciation |
| (237) |
|
| (266) | |||||
| $ | 129 |
| $ | 376 | $ | 30 |
| $ | 70 |
|
|
|
|
|
|
|
|
|
|
|
Depreciation expense related to property and equipment was approximately $0.13$0.03 million and $0.15$0.04 million in 20182020 and 2017,2019, respectively. Depreciation expense includes depreciation related to capital leases
In connection with the relocation of approximately $0.002 millionour corporate headquarters in July 2019 and $0.05 forOctober 2020, we disposed of a number of assets that were no longer in use. For the periodsyears ended December 31, 20182020 and 2017,2019, we recorded a loss on disposal of fixed assets of approximately $0.02 million and $0.01 million, respectively. Our capital leases have original terms of one to three years. The principal payments for these capital leases are reflected as cash outflows from financing activities in the accompanying consolidated statements of cash flows. Future minimum lease payments under our capital leases that have initial terms in excess of one year are included in “Contractual Obligations” in Note 10.
36
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 have contracted with a third party for the consignment sale of these assets and anticipate completion of the sale within 12 months.completed sales for several assets in 2019. For the year ended December 31, 2018,2019, we recognized a gainnet loss of approximately $0.04 million on the sale and/or impairment of assets held for sale. The gains and losses on the sale or impairment of approximately $0.01 million whichheld for sale assets is included in selling, general and administrative expenses in the accompanying statements of comprehensive loss.
40
6. INTANGIBLE ASSETS
Intangible assets consisted of the following at December 31, 20182020 and 20172019 (in thousands):
|
|
|
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
| ||
| 2018 |
| 2017 | 2020 |
| 2019 | ||||
|
|
|
|
|
|
|
|
|
|
|
Patents and copyrights | $ | 18,350 |
| $ | 19,324 | $ | 14,948 |
| $ | 16,612 |
Less accumulated amortization |
| (14,448) |
|
| (14,248) |
| (12,778) |
|
| (13,734) |
| $ | 3,902 |
| $ | 5,076 | $ | 2,170 |
| $ | 2,878 |
|
|
|
|
|
|
|
|
|
|
|
Amortization expense for each of the years ended December 31, 20182020 and 20172019 was approximately $1.1$0.4 million and $1.2$0.6 million, respectively. For each of the years ended December 31, 20182020 and 2017,2019, we recorded losses on the disposal of intangible assets of approximately $0.1 million.$0.3 million and $0.4 million, respectively.
Future estimated amortization expense for intangible assets that have remaining unamortized amounts as of December 31, 20182020 is as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
2019 | $ | 713 | ||
2020 |
| 520 | ||
2021 |
| 448 | $ | 358 |
2022 |
| 406 |
| 321 |
2023 |
| 359 |
| 283 |
2024 and thereafter |
| 1,456 | ||
2024 |
| 270 | ||
2025 |
| 231 | ||
2026 and thereafter |
| 707 | ||
Total | $ | 3,902 | $ | 2,170 |
|
|
|
|
|
7. ACCRUED LIABILITIES
Other accrued expenses consisted of the following at December 31, 2020 and 2019 (in thousands):
|
|
|
|
|
|
| 2020 |
| 2019 | ||
Advances | $ | 882 |
| $ | 500 |
Board compensation |
| - |
|
| 413 |
Other accrued expenses |
| 54 |
|
| 168 |
| $ | 936 |
| $ | 1,081 |
|
|
|
|
|
|
Advances include amounts received from litigation counsel as advanced reimbursement of out-of-pocket expenses expected to be incurred by us and, at December 31, 2020, includes approximately $0.4 million received from investors for the purchase of equity securities in a January 2021 transaction (see Note 17).
37
Board compensation of $0.4 million at December 31, 2019 represents accrued and unpaid board fees from prior periods. In 2020, current and prior board members agreed to accept share-based compensation awards with an aggregate grant-date fair value of approximately $0.1 million as partial payment for the outstanding fees and waived the remaining unpaid fees.
8. LEASES
We lease our office and other facilities and certain office equipment under long-term, non-cancelable operating and finance leases. No new finance or operating leases commenced during the years ended December 31, 2020 or 2019. During the year ended December 31, 2020, we recognized an impairment loss of approximately $0.2 million on the ROU asset related to our Lake Mary office lease. We ceased use of this facility in 2018 as part of a restructuring of our operations. The value of our ROU asset included estimated future sublease income. Due to a number of factors, including the high vacancy rate of the building in which the space is located and the current COVID-19 environment, we determined securing a sublease for the space would be unlikely. The impairment loss recognized in 2020 represented the remaining carrying value of the asset and is included in selling, general, and administrative expenses in our consolidated statements of comprehensive loss.
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 comprehensive loss. We recognized operating lease costs of $0.1 million and $0.4 million for the years ended December 31, 2020 and 2019, respectively.
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):
|
|
|
|
|
|
|
|
| Year Ended |
| Year Ended | ||
|
| December 31, |
| December 31, | ||
|
| 2020 |
| 2019 | ||
Cash paid for amounts included in the measurement of lease liabilities: |
|
|
|
|
|
|
Operating cash flows from operating leases |
| $ | 315 |
| $ | 314 |
Operating cash flows from finance leases |
|
| - |
|
| - |
Financing cash flows from finance leases |
|
| - |
|
| 1 |
|
|
|
|
|
|
|
Non-cash activity |
|
|
|
|
|
|
Right-of-use assets obtained in exchange for operating lease liabilities |
|
| - |
|
| 563 |
Assets obtained in exchange for finance lease liabilities |
|
| - |
|
| - |
|
|
|
|
|
|
|
38
Other Information
The table below summarizes other supplemental information related to leases:
|
|
|
|
|
|
|
|
|
|
|
| December 31, |
| December 31, |
|
| 2020 |
| 2019 |
Weighted-average remaining lease term (in years): |
|
|
|
|
Operating leases |
| 1.7 |
| 2.7 |
Finance leases |
| - |
| 0.3 |
Weighted average discount rate |
|
|
|
|
Operating leases (1) |
| 12.1% |
| 12.0% |
Finance leases |
| - |
| 8.7% |
|
|
|
|
|
(1) | Upon adoption of the new lease standard, discount rates used for existing leases were established at January 1, 2019. |
Undiscounted Cash Flows
The future maturities of lease liabilities consist of the following as of December 31, 2020 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Operating Leases |
| Finance Leases | ||
2021 |
| $ | 175 |
| $ | - |
2022 |
|
| 166 |
|
| - |
2023 |
|
| 4 |
|
| - |
Thereafter |
|
| - |
|
| - |
Total undiscounted lease payments |
|
| 345 |
|
| - |
Less: imputed interest |
|
| (40) |
|
| - |
Present value of lease liabilities |
|
| 305 |
|
| - |
Less: current obligations under leases |
|
| (146) |
|
| - |
Long-term lease obligations |
| $ | 159 |
| $ | - |
|
|
|
|
|
|
|
9. LONG-TERMDEBT
Notes Payable
Notes payable at December 31, 2018 and 2017, consisted of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Description | 2018 |
| 2017 | ||
Note payable to a related party | $ | 836 |
| $ | 825 |
Secured note payable |
| 2,400 |
|
| - |
Total notes payable |
| 3,236 |
|
| 825 |
Less current maturities |
| 2,437 |
|
| 294 |
Long-term note payable | $ | 799 |
| $ | 531 |
|
|
|
|
|
|
Note Payable to a Related Party
The note payable to a related party representsWe have an unsecured promissory note payable of $0.8 million to Sterne, Kessler, Goldstein, & Fox, PLLC (“SKGF”), a related party (see Note 14) upon conversion of15), for outstanding and unpaid fees for legal fees of $0.8 million in February 2016.services. The note, had anas amended, accrues interest rate of 8%at 4% per annum and provides for monthly payments of principal and interest of $10,000 with an originala final balloon payment of approximately $0.68 million due at the maturity date of April 30, 2022. We are currently in compliance with all the terms of the note, as amended. For the years ended December 31, 2020 and 2019, we recognized interest expense of approximately $0.03 million and $0.04 million, respectively, related to this note.
Unsecured Notes Payable
Unsecured notes payable at December 31, 2020 represents the current portion of our Paycheck Protection Program loan, as described more fully below. Unsecured notes payable at December 31, 2019 represents the outstanding principal balance due onof unsecured short-term promissory notes with accredited investors. The short-term promissory notes, as amended, accrued interest at a rate of 20% per annum. During the year ended December 31, 2017. In January 2018,2020, we amended the note, retroactive to December 31, 2017 to allow for interest only payments through March 2018 and principal and interest payments through March 31, 2020. In August 2018, we further amended the note, retroactive to April 30, 2018 to defer principal and interest payments from May 1, 2018 through September 30, 2018. We determined that the amendments to the note constitute modificationsissued an aggregate of the debt which are accounted for on a prospective basis.
1,740,426 shares of our common stock as
4139
an in-kind repayment of the $0.23 million in outstanding principal and $0.04 million of accrued interest on these short-term notes. For the years ended December 31, 2020 and 2019, we recognized interest expense of approximately $0.01 million and $0.03 million, respectively, related to these short-term notes.
Paycheck Protection Program Loan
In May 2020, we received approximately $0.2 million in proceeds from an approved loan under the Paycheck Protection Program. Interest accrues on the outstanding principal balance at a rate of 1%, computed on a simple interest basis. The note, as modified, providedloan principal and accrued interest are expected to be eligible for paymentsforgiveness in accordance with the loan provisions. Payments of principal and interest are deferred until the date a decision on an application for forgiveness is made. If no application is submitted, we will be required to make monthly repayments of approximately $48,500$8,000 per month commencing October 31, 2018 through March 31, 2020. Failure to comply withMay 1, 2021 and the payment terms of this note constitutes an event of defaultloan will mature on May 3, 2022, at which if uncured, will result in the entiretime any unpaid principal balance of the note and any unpaid, accrued interest to become immediatelywill be due and payable. In addition,We began the note providesapplication process for an increaseloan forgiveness in March 2021. The estimated current and noncurrent portions of this loan are included in the interest rate to 12% per annumcaptions “Unsecured notes payable” and “Other long-term liabilities” in the event of a default.
Asconsolidated balance sheet as of December 31, 2018, we were2020.
Other long-term liabilities at December 31, 2019 represents an advance payment from a potential litigation funder. This liability was reclassified as an unsecured contingent payment obligation in default on the2020 (see “unsecured contingent payment terms of the SKGF note. In March 2019, we amended the note to provide for a waiver of past payment defaults, a decrease in the interest rate from 8% per annum to 4% per annum, an extension of the maturity date of the note from March 2020 to April 2022, and a modification of payment terms under the note (see Note 16)obligation” below).
Secured Note Payable
The secured note payable representsWe have a non-interest bearing promissory note payable to Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. (“Mintz”) in settlement offor outstanding, and unpaid legalattorney’s fees and costs associated with our patent enforcement programs. We paid Mintz an initial installment of $0.1 million upon execution of the note and the remaining balance is payable in monthly installments of $0.2 million commencing November 1, 2018 and continuing until the entire unpaid principal balance is paid. We pledged as security for the note 25 United States (“U.S.”) patents and 6 correlating foreign patents that were simultaneously released by Brickell Key Investments LP (“Brickell”).program. The Mintz note is non-interest bearing, except in the event of a default, and is secured by certain of our U.S. and foreign patents. The note, at Mintz’s option, accelerates and becomes immediately due and payable in the case of standard events of default and/or in the event of a sale or other transfer of substantially all of our assets or a transfer of more than 50% of our capital stock in one or a series of transactions or through a merger or other similar transaction. In an event of default, the Mintz note will accrue interest at a rate of 12% per annum on any outstanding balance until such time that the note is paid in full. As of December 31, 2018, we
We were in default on the payment terms of the Mintz note. The payment default was cured in January 2019. On April 1, 2019, Mintz waived past and future payment defaults under the note through at least MayDecember 31, 2019, provided that no other event of default occurs. Mintz also waived acceleration of unpaid principal and accordingly, we accrued interest as well as an increase in the interest rate toat the default rate of 12%. per annum. During the year ended December 31, 2020, we repaid $1.2 million of outstanding principal and interest on the Mintz note, leaving an outstanding balance of accrued default interest, at December 31, 2020 of approximately $0.03 million. In March 2021, we settled our outstanding obligations with Mintz (see Note 17) and Mintz waived all past defaults on the note which has been paid in full.
At December 31, 2018,2020, the aggregate maturities of our notes payable after consideration of the effect of the March 2019 amendment of the SKGF note, are as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
2019 | $ | 2,437 | ||
2020 |
| 90 | ||
|
|
| ||
2021 |
| 93 | $ | 191 |
2022 |
| 616 |
| 832 |
Total | $ | 3,236 | $ | 1,023 |
|
|
|
|
|
The estimated fair value of our notes payable at December 31, 20182020 is approximately $3.0$0.9 million based on a risk-adjusted discount rate.
42
Convertible Notes
In September 2018, we sold two tranches of
Our convertible notes represent five-year promissory notes for aggregate proceeds of approximately $1.3 million, including $0.4 million sold to related parties (see Note 14). The notesthat are convertible, at the holders’ option, into shares of our common stock at fixed conversion prices. We must repay,Interest payments are made on a quarterly basis and are payable, at our option and subject to certain equity conditions, in either cash, the principal balanceshares of any outstanding, unconverted notesour
40
common stock, or a combination thereof. To date, all interest payments on the five-year anniversaryconvertible notes have been made in shares of the issuance date. Accordingly, weour common stock. We have recognized the convertible notes as debt in our consolidated financial statements. The fixed conversion prices of certain of the notes were below the market value of our common stock on the closing date resulting in the recognition of a beneficial conversion feature with a value of approximately $0.4 million. The beneficial conversion featurethat is recorded as a discount on the convertible notes with a corresponding increase to additional paid in capital.
Convertible notes payable at December 31, 20182020 and 2019, consist of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
|
|
|
|
|
|
|
|
|
| Fixed |
| Effective |
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
| Conversion |
| Interest |
|
|
| December 31, | |||||
Description |
| Fixed Conversion Rate |
| Effective Interest Rate |
| Maturity Date |
| 2018 |
| Rate |
| Rate 1 |
| Maturity Date |
| 2020 |
| 2019 | |||
Convertible notes dated September 10, 2018 |
| $0.40 |
| 8.3% |
| September 7, 2023 |
| $ | 800 |
| $0.40 |
| 23.4% |
| September 7, 2023 |
| $ | 600 |
| $ | 700 |
Convertible notes dated September 19, 2018 |
| $0.57 |
| 8.3% |
| September 19, 2023 |
|
| 425 |
| $0.57 |
| 10.2% |
| September 19, 2023 |
| 425 |
|
| 425 | |
Convertible notes dated February/March 2019 |
| $0.25 |
| 8.0% |
| February 28, 2024 to March 13, 2024 |
| 1,300 |
|
| 1,300 | ||||||||||
Convertible notes dated June/July 2019 |
| $0.10 |
| 8.0% |
| June 7, 2024 to July 15, 2024 |
| 340 |
|
| 390 | ||||||||||
Convertible notes dated July 18, 2019 |
| $0.08 |
| 46.1% |
| July 18, 2024 |
| 700 |
|
| 700 | ||||||||||
Convertible notes dated September 13, 2019 |
| $0.10 |
| 25.9% |
| September 13, 2024 |
| 50 |
|
| 50 | ||||||||||
Convertible notes dated January 8, 2020 |
| $0.13 |
| 20.3% |
| January 8, 2025 |
|
| 450 |
|
| - | |||||||||
Total principal balance |
|
|
|
|
|
|
|
| 1,225 |
|
|
|
|
|
|
|
| 3,865 |
|
| 3,565 |
Less unamortized discount |
|
|
|
|
|
|
|
| 388 |
|
|
|
|
|
|
|
| 847 |
|
| 832 |
|
|
|
|
|
|
|
| $ | 837 |
|
|
|
|
|
|
| $ | 3,018 |
| $ | 2,733 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1 The effective interest rate differs from the stated rate of interest on the notes as a result of beneficial
conversion features recognized as discounts on the debt.
The notes bear interest at a stated rate of 8% per annum. Interest is payable quarterly and we may elect to payannum, except for the July 18, 2019 notes which bear interest in either cash, shares of our common stock, or a combination thereof, subject to certain equity conditions. For the year ended December 31, 2018, we recognized interest expense of approximately $0.05 million, including approximately $0.02 related to amortization of the discount and $0.03 million related to the contractual interest which we elected to pay in shares of our common stock. The unamortized discount on the convertible notes will be amortized over a remaining period of approximately 4.75 years.
At the holders’ option, the convertible notes outstanding at December 31, 2018 could be converted into an aggregate of approximately 2.7 million shares of our common stock based on the fixed conversion prices. For the year ended December 31, 2018, an aggregate of $0.1 million in outstanding principal was converted by the holders into 0.25 million shares of our common stock at a fixed conversion pricestated rate of $0.40.
7.5% per annum. We have the option to prepay the majority of the notes any time following the one-year anniversary of the issuance of the notes, subject to a premium on the outstanding principal prepayment amount of 25% prior to the two-year anniversary of the note issuance date, 20% prior to the three-year anniversary of the note issuance date, 15% prior to the four-year anniversary of the note issuance date, or 10% thereafter. The notes provide for events of default that include failure to pay principal or interest when due, breach of any of the representations, warranties, covenants or agreements made by us, events of liquidation or bankruptcy, and a change in control. In the event of default, the interest rate increases to 12% per annum and the outstanding principal balance of the notes plus all accrued interest due may be declared immediately payable by the holders of a majority of the then outstanding principal balance of the notes.
For the years ended December 31, 2020 and 2019, we sold five-year convertible promissory notes with an aggregate face value of $0.45 million and $2.44 million, respectively and recorded debt discounts in an amount equal to the beneficial conversion features on these notes of approximately $0.17 million and $0.55 million, respectively. For the year ended December 31, 2020, convertible notes with a face value of $0.15 million were converted by the holders into 750,000 shares of our common stock at an average conversion price of $0.20. For the year ended December 31, 2019, convertible notes with a face value of $0.1 million were converted by the holders into 250,000 shares of our common stock at a fixed conversion price of $0.40. At the holders’ option, subject to ownership limitations, the convertible notes
4341
outstanding at December 31, 2020 could be converted into an aggregate of approximately 23.6 million shares of our common stock based on the fixed conversion prices.
For the years ended December 31, 2020 and 2019, we recognized interest expense of approximately $0.47 million and $0.32 million, respectively, including approximately $0.17 million and $0.12 million, respectively, related to amortization of the discount and $0.3 million and $0.2 million, respectively, related to the contractual interest which we elected to pay in shares of our common stock. For the years ended December 31, 2020 and 2019, we issued approximately 710,000 and 1,600,000 shares of our common stock, respectively, as interest-in-kind payments on our convertible notes. The unamortized discount on the convertible notes will be eliminated upon our adoption of ASU 2020-06 as of January 1, 2021 (see Note 1).
All of the shares underlying our convertible notes, including shares reserved for future in-kind interest payments on the notes, have been registered for resale.
Secured Contingent Payment Obligation
The following table provides a reconciliation of our secured contingent payment obligation measured at estimated fair market value for the yearyears ended December 31, 20182020 and 2017,2019, respectively (in thousands).
|
|
|
|
|
|
|
|
|
| |||
|
|
|
|
|
|
|
|
|
| |||
|
|
|
|
| ||||||||
|
|
| 2018 |
|
| 2017 |
|
| 2020 |
|
| 2019 |
Secured contingent payment obligation, beginning of year |
| $ | 15,896 |
| $ | 14,185 |
| $ | 26,651 |
| $ | 25,557 |
Proceeds from contingent payment obligation |
| 4,000 |
|
| 1,000 | |||||||
Repayment |
| - |
|
| - | |||||||
Change in fair value |
|
| 5,661 |
|
| 711 |
|
| 6,406 |
|
| 1,094 |
Secured contingent payment obligation, end of year |
| $ | 25,557 |
| $ | 15,896 |
| $ | 33,057 |
| $ | 26,651 |
|
|
|
|
|
|
|
|
|
|
|
|
|
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 and $1.0 million received in 2018 and 2017, respectively, in exchange for Brickell’s right to reimbursement and compensation from gross proceeds resulting from patent enforcement and other patent monetization actions. No proceeds were received from Brickell in 2019 or 2020. To date, we have repaid an aggregate of $3.3 million under the CPIA from patent license and settlement proceeds.
In 2018, we received aggregate proceeds of $4.0 million from Brickell under the CPIA including proceeds of $2.5 million received in December 2018. In connection with the additional proceeds received in December 2018, 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 (see Note 11). 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. The excess of fair value of over the proceeds received of approximately $0.8 million was included in the change in fair value of our contingent payment obligation in the accompanying consolidated statement of comprehensive loss for the year ended December 31, 2018.
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 repaymentpaid its minimum return. The minimum return is determined as a multiple of the funded amount Brickell is entitled to a portion of remaining proceeds up to a specifiedthat increases over time. The estimated minimum return which is determineddue to Brickell was approximately $42 million and $39 million as a percentage of the funded amountDecember 31, 2020 and varies based on the timing of repayment.2019, respectively. In addition, Brickell is entitled to a pro rata portion of proceeds from specified legal actions to the extent aggregate proceeds from those actions exceed the 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 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-compliancenon-
42
compliance of our obligations or misrepresentations under the agreement. As of December 31, 2018,2020, we are in compliance with our obligations under this agreement.
44
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 its estimated fair value based on probability-weighted estimated cash outflows, discounted back to present value using a discount rate determined in accordance with accepted valuation methods (see Note 8)10). The secured contingent payment obligation is remeasured to fair value at each reporting period with changes recorded in the consolidated statements of comprehensive loss until the contingency is resolved.
Unsecured Contingent Payment Obligations
The following table provides a reconciliation of our unsecured contingent payment obligations, measured at estimated fair market value, for the years ended December 31, 2020 and 2019, respectively (in thousands):
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| 2020 |
| 2019 | ||
Unsecured contingent payment obligations, beginning of period |
| $ | - |
| $ | - |
Reclassification of other liabilities |
|
| 1,003 |
|
| - |
Issuance of contingent payment rights |
|
| 2,258 |
|
| - |
Change in fair value |
|
| 1,961 |
|
| - |
Unsecured contingent payment obligations, end of period |
| $ | 5,222 |
| $ | - |
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8.Our unsecured contingent payment obligations represent amounts payable to others from future patent-related proceeds including (i) a termination fee due to a litigation funder (“Termination Fee”) and (ii) contingent payment rights (“CPRs”) issued to accredited investors primarily in connection with equity financings. We have elected to measure these unsecured contingent payment obligations at their estimated fair value based on probability-weighted estimated cash outflows, discounted back to present value using a discount rate determined in accordance with accepted valuation methods. The unsecured contingent payment obligations will be remeasured to fair value at each reporting period with changes recorded in the consolidated statements of comprehensive loss until the contingency is resolved (see Note 10).
The Termination Fee is a result of advances received under a letter agreement with a third-party funder of $0.4 million in 2019 and $0.6 million in 2020. Based on the terms of the letter agreement, if a final funding arrangement was not executed by March 31, 2020, we would be obligated to pay, from future patent-related proceeds, an aggregate termination payment equal to five times the advances received, or approximately $5.0 million. We did not consummate a funding agreement and accordingly the advances, which were initially recorded in other long-term liabilities, were reclassified to unsecured contingent payment obligations at March 31, 2020, when the Termination Fee obligation was incurred. As of December 31, 2020, the estimated fair value of unsecured contingent payment obligations related to the Termination Fee is $2.7 million.
The CPRs represent the estimated fair value of rights provided to accredited investors who purchased shares of our common stock and the fair value of a right issued to a third-party in connection with a service agreement during the year ended December 31, 2020 (see Note 13). During the year ended December 31, 2020, we received aggregate proceeds of $3.8 million from the sale of common stock with contingent payment rights, of which approximately $1.8 million was allocated to the CPRs. In addition, on May 1, 2020, we amended certain March 2020 equity purchase agreements with accredited
43
investors for the purchase of $0.9 million in common stock to add CPRs. This amendment resulted in a charge to expense of $0.4 million for the initial estimated fair value of the CPRs. The terms of the CPRs provide that we will pay each investor an allocated portion of our net proceeds from patent-related actions, after taking into account fees and expenses payable to law firms representing us and amounts payable to Brickell. The investors’ allocated portion of net proceeds will be determined by multiplying the net proceeds recovered by us (up to $10 million) by the quotient of such investors’ subscription amount divided by $10 million, up to an amount equal to each investor’s subscription amount, or an aggregate of $4.7 million. As of December 31, 2020, the estimated fair value of our unsecured contingent payment obligations related to the CPRs is $2.5 million.
10. FAIR VALUE MEASUREMENTS
ASC 820, “Fair Value Measures”Measurements” establishes a fair value hierarchy that prioritizes the inputs to valuation methods used to measure fair value. The three levels of the fair value hierarchy are as follows:
· | Level 1: Quoted prices for identical assets or liabilities in active markets which we can access |
· | Level 2: Observable inputs other than those described in Level 1 |
· | Level 3: Unobservable inputs |
The following table summarizes financial assets and financial liabilities carried at fair value and measured on a recurring basis as of December 31, 20182020 and 2017,2019, segregated by classification within the fair value hierarchy (in thousands):
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| Fair Value Measurements | |||||||
| Total |
| Quoted Prices in |
| Significant Other |
| Significant | ||||
December 31, 2018: |
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Liabilities: |
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Secured contingent payment | $ | 25,557 |
| $ | - |
| $ | - |
| $ | 25,557 |
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December 31, 2017: |
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Assets: |
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Available-for-sale securities | $ | 26 |
| $ | 26 |
| $ | - |
| $ | - |
Restricted cash equivalents |
| 1,000 |
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| 1,000 |
|
| - |
|
| - |
Liabilities: |
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Secured contingent payment |
| 15,896 |
|
| - |
|
| - |
|
| 15,896 |
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| Fair Value Measurements | ||||||||
| Total |
| Quoted Prices in |
| Significant Other |
| Significant (Level 3) | |||||
December 31, 2020: |
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| |
Liabilities: |
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| |
Secured contingent payment obligation | $ | 33,057 |
| $ | - |
| $ | - |
| $ | 33,057 | |
Unsecured contingent payment obligations |
| 5,222 |
|
| - |
|
| - |
|
| 5,222 | |
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December 31, 2019: |
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| |
Liabilities: |
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| |
Secured contingent payment obligation |
| 26,651 |
|
| - |
|
| - |
|
| 26,651 | |
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For the years ended December 31, 20182020 and 2017,2019, respectively, we had no transfers of assets or liabilities between the levels of the hierarchy. We determine the
The fair valuevalues of our available-for-sale securitiessecured and restricted cash equivalents using a market approach based on quoted prices in active markets (Level 1 inputs).
In 2016, we recognized a securedunsecured 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, 2018 and 2017 wasobligations were estimated at $25.6 million and $15.9 million, respectively. These values were calculated using a probability-weighted income approach based on various cash flow scenarios as to the outcome of patent-related actions both in terms of timing and amount, discounted to present value using a risk-adjusted rate. The contingent payment obligation does not have a fixed
45
duration; however, our cash flow projections assume a duration through 2021. The assumed cash outflows range from $0 to $46 million and the cash flow scenarios have probabilities of 0% to 35%. We used a risk-adjusted discount rate of approximately 16.5%,14.15% at December 31, 2020, based on a two year risk-free rate of approximately 2.5%0.15% as adjusted by 8% for credit risk and 6% for litigation inherent risk.
44
The following table provides quantitative information about the significant unobservable inputs used in the measurement of fair value for both the secured and unsecured contingent payment obligations at December 31, 2020, including the lowest and highest undiscounted payout scenarios as well as a weighted average payout scenario based on relative undiscounted fair value of each cash flow scenario.
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| Secured Contingent Payment Obligation |
| Unsecured Contingent Payment Obligations | ||||||||||||||
Unobservable Inputs |
| Low |
| Weighted Average |
| High |
| Low |
| Weighted Average |
| High | ||||||
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Estimated undiscounted cash outflows (in millions) |
| $ | 0.0 |
| $ | 46.1 |
| $ | 70.2 |
| $ | 0.0 |
| $ | 7.3 |
| $ | 9.7 |
Duration (in years) |
|
| 1.0 |
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| 2.5 |
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| 3.5 |
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| 1.0 |
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| 2.5 |
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| 3.5 |
Estimated probabilities |
|
| 5% |
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| 23% |
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| 25% |
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| 25% |
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| 25% |
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| 25% |
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We evaluate the estimates and assumptions used in determining the fair value of our contingent payment obligations each reporting period and make any adjustments prospectively based on those evaluations. Changes in any of these Level 3 inputs could result in a significantly higher or lower fair value measurement. For example, a decrease in the risk-adjusted discount rate from 16.5% to 8% would result in an increase in the fair value of approximately $4.6 million. Refer to Note 7 for a reconciliation of our secured contingent payment obligation measured at estimated fair value for the years ended December 31, 2018 and 2017.
measurement
9.11. INCOME TAXES AND TAX STATUS
Our net losses before income taxes for the years ended December 31, 20182020 and 20172019 are from domestic operations as well as losses from our wholly-owned German subsidiary. We elected to treat our German subsidiary as a disregarded entity for purposes of income taxes and accordingly, the losses from our German subsidiary hashave been included in our operating results.
No current or deferred tax provision or benefit was recorded in 20182020 or 20172019 as a result of current losses and fully deferred tax valuation allowances for all periods. We have recorded a valuation allowance to state our deferred tax assets at their estimated net realizable value due to the uncertainty related to realization of these assets through future taxable income.
On December 22, 2017, the U.S. government enacted comprehensive tax legislation, the Tax Act. The Tax Act makes broad and complex changes to the U.S. tax code that includes a reduction to the U.S. federal corporate statutory tax rate to 21% effective in 2018. The Securities and Exchange Commission (“SEC”) staff issued Staff Accounting Bulletin 118 which provides guidance on accounting for the impact of the Tax Act and states that a reasonable estimate of the Tax Act’s effects on our deferred tax balances should be included in our consolidated financial statements. As of December 31, 2017, our accounting for the income tax effects of the Tax Act was completed and there were no adjustments related to the Tax Act in our reporting period ended December 31, 2018. The federal corporate tax rate reduction created a reduction to our deferred tax assets and liabilities with a corresponding reduction to our valuation allowance.
A reconciliation between the provision for income taxes and the expected tax benefit using the federal statutory rate of 21% and 34% for each of the years ended December 31, 20182020 and 2017,2019, respectively are as follows (in thousands):
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| 2018 |
| 2017 | 2020 |
| 2019 | ||||
Tax benefit at statutory rate | $ | (4,382) |
| $ | (6,548) | $ | (4,111) |
| $ | (1,985) |
State tax benefit |
| (897) |
|
| (674) |
| (842) |
|
| (407) |
Impact of the Tax Act |
| - |
|
| 41,646 | |||||
Increase (decrease) in valuation allowance |
| 5,304 |
|
| (34,346) | |||||
Research and development credit |
| (51) |
|
| (129) | |||||
Increase in valuation allowance |
| 4,307 |
|
| 2,341 | |||||
Other |
| 26 |
|
| 51 |
| 646 |
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| 51 |
| $ | - |
| $ | - | $ | - |
| $ | - |
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4645
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, 20182020 and 20172019 (in thousands):
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| 2018 |
| 2017 | 2020 |
| 2019 | ||||
Gross deferred tax assets: |
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Net operating loss carry-forward | $ | 84,192 |
| $ | 82,168 | $ | 80,848 |
| $ | 83,865 |
Research and development credit |
| 7,879 |
| 8,051 | ||||||
Research and development credit carry-forward |
| 6,603 |
| 7,608 | ||||||
Stock compensation |
| 1,027 |
| 1,248 |
| 122 |
| (28) | ||
Patents and other |
| 1,495 |
| 1,427 |
| 1,466 |
| 1,479 | ||
Contingent payment obligation |
| 2,842 |
| 1,409 | ||||||
Contingent payment obligations |
| 5,235 |
| 3,119 | ||||||
Inventories |
| 249 |
| - |
| - |
| 139 | ||
Fixed assets |
| 25 |
| 25 |
| 54 |
| 3 | ||
Accrued liabilities |
| 146 |
| 49 |
| 64 |
| 200 | ||
Deferred rent and lease liabilities |
| 46 |
| 20 | ||||||
Charitable contributions |
| 5 |
| 7 | ||||||
Deferred revenue |
| - |
| 5 | ||||||
Capital loss carry-forward |
| 3 |
| 3 | ||||||
Warranty reserve |
| 4 |
| 2 | ||||||
Bad debt expense |
| - |
|
| 1 | |||||
Lease liabilities |
| 77 |
| 142 | ||||||
Other |
| - |
|
| 3 | |||||
|
| 97,913 |
|
| 94,415 |
| 94,469 |
|
| 96,530 |
Less valuation allowance |
| (97,816) |
|
| (94,415) |
| (94,245) |
|
| (96,320) |
|
| 97 |
|
| - |
| 224 |
|
| 210 |
Gross deferred tax liabilities: |
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Convertible debt |
| (97) |
|
| - |
| (224) |
|
| (210) |
|
| (97) |
|
| - |
| (224) |
|
| (210) |
Net deferred tax asset | $ | - |
| $ | - | $ | - |
| $ | - |
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Approximately $0.1$0.2 million, net of tax effect, of unrecognized tax benefit related to the beneficial conversion feature of convertible debt would be recorded as an adjustment to contributed capital rather than a decrease in earnings, if recognized.
At December 31, 2018,2020, we had cumulative net operating loss (“NOL”) carry-forwards for income tax purposes of $336.4$323.2 million, of which $323.5$294.1 million is subject to expiration in varying amounts from 20192021 to 2036.2037. At December 31, 2018,2020, we also had research and development tax credit carryforwards of $7.9$6.6 million, which expire in varying amounts from 20192021 through 2037. 2038.
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, 20182020 which would result in limitations of our NOL, capital loss or R&D credit carry-forwards under Section 382.
47
Uncertain Tax Positions
We file income tax returns in the U.S. federal jurisdiction, and various state jurisdictions.jurisdictions, and Germany. We have identified our Federal and Florida tax returns as our only major jurisdictions, as defined. The periods subject to examination for those returns are the 19982001 through 20182020 tax years. The following table
46
provides a reconciliation of our unrecognized tax benefits due to uncertain tax positions for the years ended December 31, 20182020 and 2017,2019, respectively (in thousands).
:
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| 2018 |
| 2017 | 2020 |
| 2019 | ||||
Unrecognized tax benefits – beginning of year | $ | 927 |
| $ | 1,370 | $ | 927 |
| $ | 927 |
Impact of the Tax Act |
| - |
|
| (443) | |||||
Unrecognized tax benefits – end of year | $ | 927 |
| $ | 927 | $ | 927 |
| $ | 927 |
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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, 20182020 and 2017,2019, we did not incur any income tax-related interest income, expense or penalties.
10.12. COMMITMENTS AND CONTINGENCIES
Lease Commitments
The following table presents a summary of our facilities under non-cancelable lease agreements at December 31, 2018:
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Description |
| Lease Start Date |
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| Lease End Date |
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| Renewal options remaining |
| Straight line monthly rental payment (in thousands) | |
Corporate office, Jacksonville, Florida |
| 7/15/2018 |
|
| 7/31/2019 |
|
| none |
| $ | 31 |
Wireless design facility, Lake Mary, Florida |
| 7/1/2017 |
|
| 11/30/2022 |
|
| 2 options to extend for 36 months each |
| $ | 13 |
Warehouse and production facility, Jacksonville, Florida |
| 7/1/2017 |
|
| 7/31/2020 |
|
| none |
| $ | 2 |
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Deferred rent is amortized to rent expense over the respective lease terms. In addition to sales tax payable on base rental amounts, certain leases obligate us to pay pro-rated annual operating expenses for the properties. Rent expense for our facilities for the years ended December 31, 2018 and 2017 was approximately $0.5 million and $0.6 million, respectively.
48
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):
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Contractual obligations: | 2019 |
| 2020 |
| 2021 and thereafter |
| Total | ||||
Operating leases | $ | 372 |
| $ | 191 |
| $ | 345 |
| $ | 908 |
Capital leases | $ | 2 |
| $ | 1 |
| $ | - |
| $ | 3 |
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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.
Legal Proceedings
WeFrom time to time, we are a partysubject to a numberlegal proceedings and claims which arise in the ordinary course of our business. These proceedings include patent enforcement actions initiated by us against others for the infringement of our technologies, as well as counter claims and proceedings brought by others against us at the Patent Trial and Appeal Board of the U.S. Patent and Trademark Office (“PTAB”) and in the Federal Patent Court in Germany in an attempt to invalidate certain of our patent claims. These patent-related proceedings are more fully described below.
We havehad several patent enforcement actions in Germany in which we did not prevail. Germany has a “loser pay” system whereby the non-prevailing party is responsible for statutory attorney fees and costs. If we determine it is probable that we will have an unfavorable outcome in anyAll of our German cases, we record an estimate of expenses for the probable loss.actions were concluded in 2019. We received an unfavorable decision from Germany in October 2018, as more fully described below (see Qualcomm v. ParkerVision – Federal Patent Court in Germany). As a result, for the year ended December 31, 2018, we have recorded an aggregate of $0.1 million in expensesestimated loss for statutory attorney fees and costs estimated in that case. There is at least a reasonable possibility of an unfavorable outcome in any one or more of our legal proceedings that could result in expensescurrent liabilities under the heading “statutory court costs” in the consolidated balance sheets. As of December 31, 2020 and 2019, we have accrued an aggregate that couldof $0.25 million and $0.37 million, respectively, for our concluded cases in Germany. We also have a material unfavorable impact on our resultsbond posted in Germany that upon release will satisfy $0.14 million of operations as more fully discussed below.these accrued costs. The bond is recorded in prepaid expenses (see Note 4).
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.) seeking approximately $1.3 billion in damages for infringement of four of our patents (the “Qualcomm Action”) seeking unspecified damages. HTC Corporation and injunctive relief for infringement of certain ofHTC America, Inc. (collectively “HTC”) were also defendants in this case but we voluntarily dismissed our patents. Certain of the defendants have filedclaims against HTC and HTC dismissed their related counter-claims against us in October 2020. Qualcomm has pending counterclaims against us for non-infringement and invalidity for all patents in the case. A claim construction hearingThe case was heldfiled in August 2015 but no ruling on claim construction has been issued by the court. InMay 2014 and stayed in February 2016 the court granted the parties’ joint motion to stay these proceedings until resolution of the proceedings at the International Trade Commission (“ITC”) as discussed below. In May 2017, the stay of these proceedings was continued pending andecisions in other cases, including the appeal of certain Patent Trial and Appeal Board (“a PTAB”) decisions proceeding with regard to our U.S. Patentpatent 6,091,940 (“the ‘940 Patent”). In September 2018, the Federal Circuit issued its decision in the appeal of the ‘940 Patent as discussed in Qualcomm v. ParkerVision – PTAB below. Accordingly, in January 2019, the court lifted the stay. A trial schedule has not yet been set for this case.
Qualcomm v. ParkerVision -PTAB
In August 2015, Qualcomm filed an aggregate of ten petitions for Inter Partes Review (“IPR”) with the PTAB seeking to invalidate certain claims related to three of the eleven patents originally asserted in our Qualcomm Action. In March 2016, the PTAB issued decisions denying institution of trial for three of the petitions, all of which relate to our U.S. patent 7,039,372 (“the ‘372 Patent”). The remaining petitions, all of which relate to the ‘940 Patent and U.S. patent 7,966,012 (“the ‘012 Patent”) were instituted for trial by the PTAB. In May 2016, the PTAB granted our motion to disclaim the challenged claims of the ‘012
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Patent and entered an adverse judgment against us with respect to those claims.this case. In March 2017, the PTAB issued its decisions on the six outstanding IPRs, all of which relate to the ‘940 Patent. The PTAB ruled in our favor on three of the six petitions (the method claims), ruled in Qualcomm’s favor on two of the six petitions (the apparatus claims) and issued a split decision on the claims covered in the sixth petition. As a result of the PTAB decisions, certain claims of the ‘940 Patent were found to be un-patentable and certain claims were found not to be un-patentable. In May 2017, we filed a notice of appeal of these decisions with the United States Court of Appeals forSeptember 2018, the Federal Circuit (“CAFC”). Qualcomm also appealed the decisions that were unfavorable to them. On September 13, 2018, the CAFC upheld the PTAB rulingPTAB’s decision with regard to the ‘940 Patent and, in January 2019, the court lifted the stay in this case. In July 2019, the court issued an order that granted our proposed selection of patent claims from four asserted patents, including the ‘940 Patent, and denied Qualcomm’s request to limit the claims and patents. The court also agreed that we may elect to pursue accused products that were at issue
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at the time the case was stayed, as well as new products that were released by Qualcomm during the pendency of the stay. In September 2019, Qualcomm filed a motion for partial summary judgement in an attempt to exclude certain patents from the case, including the ‘940 Patent. The court denied this motion in January 2020. In April 2020, the court issued its claim construction order in which the court adopted our proposed construction for seven of the ten disputed terms and adopted slightly modified versions of our proposed construction for the remaining terms. Due to the impact of COVID-19, a number of the scheduled deadlines in this case were moved including the trial commencement date which was rescheduled from December 2020 to May 2021. We are seeking $1.3 billion in royalties owed to us by Qualcomm for its unauthorized use of our technology, based on a report submitted by our damages expert in this case in October 2020. Such amount excludes additional amounts requested by us for interest and enhanced damages for willful infringement. Ultimately, the amount of damages, if any, will be determined by the court. Discovery was expected to close in December 2020; however, the court allowed us to designate a substitute expert due to medical issues with one of our experts in the case. Accordingly, the close of discovery was delayed until January 2021. As a result of these delays, the ruling, we prevailed with regardcourt rescheduled the trial commencement date from May 3, 2021 to the method claims of the ‘940 PatentJuly 6, 2021. Fact and Qualcomm prevailed on the apparatus claims. This matter is now closed although the patents at issueexpert discovery in this proceedingcase are closed, expert reports have been submitted, and summary judgement and Daubert briefings have been completed by the subject ofparties. In March 2021, the Qualcomm Action discussed above.
ParkerVision v. Apple and Qualcomm (ITC)
In December 2015, we filed a complaint with the U.S. ITC against Apple, Inc., LG Electronics, Inc., LG Electronics U.S.A., Inc., and LG Electronics MobileComm U.S.A., Inc. (collectively “LG”), Samsung Electronics Co., Ltd., Samsung Electronics America, Inc., and Samsung Semiconductor, Inc. (collectively “Samsung”) and Qualcomm alleging that these companies make, use or sell products that infringecourt granted Qualcomm’s motion to strike certain of our patent claims and requesting that2020 infringement contentions. A number of outstanding motions are pending decisions by the ITC barcourt. On March 26, 2021, the defendants from continuingcourt further delayed the trial date citing backlog due to import and sell infringing products in the U.S. We filed a corresponding patent infringement complaint inpandemic, among other factors. A new trial date has not yet been set although the Middle District of Florida against these same defendants. In January 2016, the ITC instituted an investigation based on our complaint. In July 2016, we entered into a confidential patent license and settlement agreement with Samsung and, as a result, Samsung was removed from the ITC action. In January 2017, we dismissed three of the four patents fromcourt indicated the case was unlikely to be tried before November or December 2021. We are represented in order to simplify the investigation. On March 10, 2017, the administrative law judge issued a rulingthis case on a pre-trial motion that precluded us from presenting key evidence in our case. As a result, on March 13, 2017, we filed a motion to terminate the proceedings at the ITC. On April 28, 2017, the ITC granted our motion to withdraw from the ITC proceedings. full contingency fee basis.
ParkerVision v. Apple and Qualcomm (Middle District of Florida)
In December 2015, we filed a patent infringement complaint in the Middle District of Florida against Apple, LG, Samsung and Qualcomm alleging infringement of four of our patents. In February 2016, the district court proceedings were stayed pending resolution of thea corresponding case filed at the ITC.International Trade Commission (“ITC”). In July 2016, we entered into a patent license and settlement agreement with Samsung and, as a result, Samsung was dismissed from the district court action. In March 2017, we filed a motion to terminate the ITC proceedings and a corresponding motion to lift the stay in the district court case. This motion was granted in May 2017. In July 2017, we filed a motion to dismiss LG from the district court case and re-filed our claims against LG in the District of New Jersey (see ParkerVision v. LG below). Also in July 2017, Qualcomm filed a motion to change venue to the southern districtSouthern District of California, and Apple filed a motion to dismiss for improper venue. In March 2018, the district court ruled against the Qualcomm and Apple motions. The parties also filed a joint motion in March 2018 to eliminate three of the four patents in the case in order to expedite proceedings leaving our U.S. patent 9,118,528 as the only remaining patent in this case. A claim construction hearing was held on August 31, 2018,2018. In July 2019, the court issued its claim construction order in which the court adopted our proposed claim construction for two of the six terms and we are currently awaiting the court’s decision regarding claim language pertinent“plain and ordinary meaning” on the remaining terms. In addition, the court denied a motion filed by Apple for summary judgment. Fact discovery has closed in this case and a jury trial was scheduled to thisbegin in August 2020. In March 2020, as a result of the impact of COVID-19, the parties filed a motion requesting an extension of certain deadlines in the case. We anticipate that a trial date will be scheduled forIn April 2020, the court stayed this proceeding followingpending the court’s order regarding claim construction.outcome of the Qualcomm Action. We are represented in this case on a limited success fee basis.
ParkerVision v. LG (District of New Jersey)
In July 2017, we filed a patent infringement complaint in the districtDistrict of New Jersey against LG for the alleged infringement of the same patents previously asserted against LG in the middle districtMiddle District of Florida (see ParkerVision v. Apple and Qualcomm above). We elected to dismiss the case in the middle districtMiddle District of Florida and re-file in New Jersey as a result of a recent Supreme Court ruling regarding proper venue. In March 2018, the court stayed this case pending a final decision in ParkerVision v. Apple and Qualcomm
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in the Middle District of Florida. As part of this stay, LG has agreed to be bound by the final
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claim construction decision in that case.
ParkerVision v. LG Electronics (Munich, Germany)
In June 2016, we filed a complaint in Munich District Court against LG Electronics Deutschland GmbH, a German subsidiary of LG Electronics, Inc. (“LGE”) seeking damages and injunctive relief for the alleged infringement of the German part of our European patent 1 206 831 (“the ‘831 Patent”). A hearingWe are represented 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 have filed an appeal. The outcome of our appeal of the nullity action will determine the outcome of this action. If our appeal is unsuccessful, we will be subject toon a claim for reimbursement of statutory attorney’s fees and costs in this case. We estimate a claim of approximately $0.06 million for which we have posted a bond. The cost of the bond is included in “Prepaid expenses” in the accompanying consolidated balance sheets and will be charged to expense if a loss becomes probable.limited success fee basis.
ParkerVision v. Apple (Munich, Germany) - the Apple I caseIntel (Western District of Texas)
In October 2016,February 2020, we filed a patent infringement complaint in Munichthe Western District Courtof Texas against Apple, Inc.Intel alleging infringement of eight of our patents. The complaint was amended in May 2020 to add two additional patents. In June 2020, we requested that one of the patents be dropped from this case and filed a second case in the Western District of Texas that included this dismissed patent (see ParkerVision v. Intel II below). Intel’s response to our complaint was filed in June 2020 denying infringement and claiming invalidity of the patents. Intel also filed a motion to transfer venue which the court denied in January 2021. The court issued its claim construction ruling in January 2021 in which the majority of the claims were decided in our favor. The case is scheduled for trial beginning February 7, 2022. We are represented in this case on a full contingency fee basis.
Intel v. ParkerVision (PTAB)
Intel filed petitions for Inter PartesReview (IPR) against U.S. patent 7,539,474 (“the ‘474 Patent”), Apple Distribution International, and Apple Retail Germany B.V. & Co. KG (collectively “U.S. patent 7,110,444 (“Applethe ‘444 Patent”) seeking damages and injunctive reliefU.S. patent 8,190,108 (“the ‘108 patent”), all of which are patents asserted in ParkerVision v. Intel. In January 2021, the PTAB issued its decision to institute IPR proceeding for the alleged‘444 Patent and the ‘474 Patent. Our response to the instituted IPRs is due in April 2021. The PTAB has not yet issued a decision for the ‘108 Patent.
ParkerVision v. Intel II (Western District of Texas)
In June 2020, to reduce the number of claims in ParkerVision v. Intel, we filed a second patent infringement complaint in the Western District of Texas against Intel that included a single patent that we voluntarily dismissed from the ‘831 Patent (the “Apple I Case”).original case. In February 2017,July 2020, we amended our complaint adding two more patents to the infringement of a second German patentcase. The claim construction hearing is expected to be scheduled after May 2021 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 below). In October 2018, we received an unfavorable decision in the nullity caseis currently scheduled for which we have filed an appeal.trial beginning March 17, 2022. We have not posted a bond to cover the potential statutory costs in this case. In March 2019, the district court declared the complaint withdrawn, a decision we are able to appeal provided we post a bond for approximately $0.1 million by April 2019. If we fail to post a bond or our appeal of the nullity action is unsuccessful, we will be subject to a claim for reimbursement of statutory attorney’s fees and costs of approximately $0.1 million. The accompanying consolidated financial statements do not include any accrual for a loss contingencyrepresented in this case as the loss is not considered probable as of December 31, 2018.
Qualcomm v. ParkerVision -Federal Patent Court in Germany (as appealed to the German Supreme Court)
In August 2016, Qualcomm filedon 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. Based on the October 2018 decision from the federal court, we have accrued a contingent loss of $0.1 million for the estimated statutory fees and costs in this case. In January 2019, we appealed this decision to the German Supreme Court. Dates have not yet been established for the appeal. If we ultimately do not prevail in this case, in addition to the contingent loss recorded at December 31, 2018, we will be subject to a claim for reimbursement of statutory attorney fees and costs for the appeal which we estimate to be approximately $0.1 million. In addition, we may be subject to claims for reimbursement of statutory attorney fees and costs for the LG and Apple I cases that are stayed pending this validity decision. We estimate these possible additional costs to be approximately $0.2 million, a portion of which is covered by a $0.06 million bond we have posted in the LG case.
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ParkerVision v. Apple (Munich, Germany)-the Apple II case
The Apple II case seeks damages and injunctive relief for the alleged infringement of the German part of our European patent 1 135 853 (“the ‘853 Patent”). A preliminary hearing was held in November 2017. Subsequent to the hearing, the court requested that we supplement certain elements of the infringement claims against Apple devices. In May 2018, we filed our supplemental briefs as requested by the court. In October 2018, we also filed a supplemental expert report. The court appointed an expert in this case and a hearing was held in March 2019 for purposes of providing expert testimony. The court is expected to rule in April 2019. We have posted a bond of approximately $0.14 million which is our estimated maximum exposure in this case. The cost of the bond is included in “Prepaid expenses” in the accompanying consolidated balance sheets as of December 31, 2018.full contingency fee basis.
Intel v. ParkerVision(Federal Patent Court in Germany)
In August 2017, Intel filed a nullity actionnumber of additional patent cases in German Federal Patent Courtthe Western District of Texas including cases against (i) TCL Industries Holdings Co., Ltd, a Chinese company, TCL Electronics Holdings Ltd., Shenzhen TCL New Technology Co., Ltd, TCL King Electrical Appliances (Huizhou) Co., Ltd., TCL Moka Int’l Ltd. and TCL Moka Manufacturing S.A. DE C.V. (collectively “TCL”), (ii) Hisense Co., Ltd. and Hisense Visual Technology Co., Ltd (collectively “Hisense”), a Chinese company, (iii) Buffalo Inc., a Japanese company (“Buffalo”)and (iv) Zyxel Communications Corporation, a Chinese multinational electronics company headquartered in Taiwan, (“Zyxel”). Each case alleges infringement of the same ten patents by products that incorporate modules containing certain Wi-Fi chips manufactured by Realtek and/or MediaTek. Each of the defendants have filed responses denying infringement and claiming invalidity of the ‘853 Patent that is the subjectpatents, among other defenses. We are represented in each of the Apple II case. If the ‘853 Patent is declared invalid, we may be subject tothese cases on a claim for reimbursement of statutory attorney fees and costs in this case which we currently estimate will not exceed $0.1 million. No dates have yet been set in this nullity action, and the accompanying consolidated financial statements do not include any accrual for a lossfull contingency in this case as a loss is not considered probable as of December 31, 2018.
fee basis.
11.13. STOCK AUTHORIZATION AND ISSUANCE
Preferred Stock
We have 15 million shares of preferred stock authorized for issuance at the direction of theour 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, 2018,2020, we had no outstanding preferred stock.
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Common Stock
We have 75140 million shares of common stock authorized for issuance.issuance as of December 31, 2020. Our shareholders approved an amendmentamendments to our articles of incorporation in 2017 to increase the number of authorized shares of common stock from 20 million to 30 million shares. In addition, on June 12, 2018, our shareholders approved an amendment to our articles of incorporation to increase the number of authorized shares of common stock from 30 million to 40 million shares and on October 30, 2018, our shareholders approved an amendment to our articles of incorporation to increaseNovember 2019 increasing the number of our authorized shares of common stock from 4075 million to 75110 million shares and in July 2020 increasing the number of our authorized shares of common stock from 110 million to 140 million shares.
As of December 31, 2018,2020, we have 14.525.3 million shares reserved for issuance under outstanding warrants, options, and unvested RSUs 0.3and 23.6 million shares reserved for issuance upon conversion of our outstanding convertible notes. In addition, we have 0.2 million shares reserved for future issuance under shareholder approved equity compensation plans and 6.07.5 million shares reserved for the payment of interest and conversion of principal under outstandingin-kind on our convertible notes.
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Stock and Warrant Issuances – Equity Based Financings
During the year ended December 31, 2019, we did not issue any stock or warrants in financing transactions. The following table presents a summary of completed equity offeringsequity-based financing transactions for the yearsyear ended December 31, 2018 and 20172020 (in thousands, except for per share amounts):
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Date | Transaction |
| # of Common Shares/ Units Sold |
| Average Price per Share/Unit |
| # of Warrants Issued |
| Average Exercise Price per Warrant |
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| Net Proceeds (1) |
July 2018 and September 2018 | Offerings under PIPE Agreement |
| - |
| - |
| 10,000 |
| $0.38 |
| $ | 1,901 |
March 2018 | Director Stock Purchase |
| 217 |
| $0.83 |
| - |
| - |
| $ | 180 |
March - May 2018 | Offerings under ATM |
| 1,359 |
| $0.87 |
| - |
| - |
| $ | 1,148 |
January - June 2018 | Offerings under Equity Line Agreement |
| 2,940 |
| $0.70 |
| - |
| - |
| $ | 2,047 |
October - December 2017 | Offerings under Equity Line Agreement |
| 773 |
| $1.29 |
| - |
| - |
| $ | 958 |
August - December 2017 | Offerings under ATM |
| 2,119 |
| $1.50 |
| - |
| - |
| $ | 2,970 |
February 2017 | Director Stock Purchase |
| 81 |
| $2.11 |
| - |
| - |
| $ | 170 |
January - March 2017 | Offerings under ATM |
| 4,072 |
| $2.46 |
| - |
| - |
| $ | 9,581 |
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Date | Transaction |
| # of Common Shares/ Units Sold |
| Average Price per Share/Unit |
| # of Warrants Issued |
| Average Exercise Price per Warrant |
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| Net Proceeds (1) |
January 2020 | Private placement of common stock |
| 1,335 |
| $0.13 |
| - |
| - |
| $ | 177 |
February 2020 | Warrant amendment |
| - |
| - |
| 5,000 |
| $0.74 |
| $ | - |
March 2020 | Private placement of common stock, amended to add CPR |
| 2,571 |
| $0.35 |
| - |
| - |
| $ | 900 |
April 2020 to December 2020 | Private placement of common stock with CPRs |
| 10,858 |
| $0.35 |
| - |
| - |
| $ | 3,724 |
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(1) | After deduction of applicable |
Private Placements
Private PlacementIn January 2020, we entered into securities purchase agreements with Aspire Capitalaccredited investors for an aggregate of 1,169,232 shares of our common stock at a price of $0.13 per share and 166,667 shares of our common stock at $0.15 per share for aggregate proceeds of approximately $0.2 million.
In March 2020, we entered into securities purchase agreements with accredited investors for an aggregate of 2,571,432 shares of our common stock at a price of $0.35 per share for aggregate proceeds of $0.9 million. The securities purchase agreements for the March 2020 transactions were amended on May 1, 2020, in order to add a contingent payment right whereby we will pay each investor an allocated portion of our share of proceeds from patent-related actions, after taking into account fees and expenses payable to law firms representing the Company and amounts payable to Brickell, up to an amount equal to the investors’ aggregate subscription amount, or $0.9 million (see “unsecured contingent payment obligations” in Note 9). The shares were registered for resale on a registration statement that was declared effective on April 28, 2020 (File No. 333-237762).
From April to December 2020, we entered into securities purchase agreements with accredited investors for an aggregate of 10,857,876 shares of our common stock at a price of $0.35 per share for aggregate proceeds of $3.8 million. The securities purchase agreements include contingent payment rights. Approximately $1.8 million of the proceeds were allocated to unsecured contingent payment obligations
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based on the initial fair value estimate of the CPRs (see Note 9). The shares sold from April to August, totaling 5,871,584 shares, were registered for resale on a registration statement that was declared effective on September 2, 2020 (File No. 333-248242).
In July 2018,For the shares sold subsequent to August 2020, we entered into registration rights agreements with the investors pursuant to which we will register the shares. We have committed to file the registration statement by April 15, 2021 and to cause the registration statement to become effective by June 30, 2021. The registration rights agreements provide for liquidated damages upon the occurrence of certain events including failure by us to file the registration statement or cause it to become effective by the deadlines set forth above. The amount of the liquidated damages is 1.0% of the aggregate subscription upon the occurrence of the event, and monthly thereafter, up to a maximum of 6%, or approximately $0.1 million.
Warrant Amendment
On February 28, 2020, we entered into a securities purchasewarrant amendment agreement (the “PIPEWarrant 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 sale2018 Warrants from $0.74 to $0.35 per share and the issuance of up to $2.0 milliona new warrant for the purchase of 5,000,000 shares of our common stock (or pre-funded warrants)at an exercise price of $0.74 per share (“New Aspire Warrant”). The New Aspire Warrant expires February 28, 2025 and is subject to adjustment in the event of certain stock dividends and distributions, stock splits, stock combinations, reclassifications or similar events affecting our common stock and 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 recognized $1.78 million of non-cash warrant expense in connection with the Warrant Amendment Agreement based on the difference between the Black-Scholes value of the warrants immediately before and after the amendment. The 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 two tranches. Uponexchange for consideration equal to $0.001 per warrant share and subject to certain conditions. All other terms of the initial closing,2018 Warrants remained unchanged, including the original expiration dates of July and September 2023. The shares underlying the New Aspire Warrant were registered for resale on a registration statement that was declared effective on April 28, 2020 (File No. 333-237762). The shares underlying the 2018 Warrants are currently registered for resale pursuant to a registration statement on Form S-1 (File No. 333-226738).
In connection with the Warrant Amendment Agreement, Aspire exercised 1,430,000 shares of the 2018 Warrants for aggregate proceeds to us of $0.5 million. An additional 3,070,000 shares of the 2018 Warrants were exercised during the year ended December 31, 2020 for aggregate additional proceeds to us of approximately $1.1 million. We did not exercise the call provision and the Aspire exercised the remaining 2018 Warrants in January 2021 (see Note 17).
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Stock and Warrant Issuances – Payment for Services
On February 10, 2020, we soldentered into a business consulting and retention agreement with Chelsea Investor Relations (“Chelsea”) to Aspire Capital (i)provide business advisory services to us. As consideration for services to be provided under the 24-month term of the consulting agreement, we issued 500,000 shares of unregistered common stock in exchange for a pre-funded warrantnonrefundable retainer for services valued at approximately $0.15 million. The value of the stock issued is being recognized as consulting expense over the term of the agreement. The shares were registered for resale on a registration statement that was declared effective on April 28, 2020 (File No. 333-237762). The agreement was amended in January 2021 (see Note 17).
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 2.5 million200,000 shares of our common stock with an exercise price of $0.01$1.00 per share (“Pre-Funded Warrant”)in exchange for a nonrefundable retainer for services, valued using the Black-Scholes method, at approximately $0.06 million. The value of the warrants is being recognized as expense over the term of the agreement. The Tailwinds warrants are exercisable immediately after issuance, expire March 16, 2023, and (ii) a warrantare subject to purchase up to 2.5 million sharesadjustment in the event of certain stock dividends and distributions, stock splits, stock combinations, reclassifications or similar events affecting 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.stock. The shares underlying the Pre-Funded Warrants and Warrants arewarrant were registered underfor resale on a registration statement that becamewas declared effective in September 2018 (Registration No.333-226738)on April 28, 2020 (File No. 333-237762).
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At Market Issuance Sales Agreements
We filed a shelf registration statement on Form S-3 with the SEC in November 2016 (Registration No. 333-214598) for the offering of various securities, up to $15 million, over a period of up to three years. On December 30, 2016,June 8, 2020, we entered into an At Market Issuance Sales Agreement (“ATM”)agreement with FBR Capital Markets & Co. (“FBR”)a third party to provide media advisory services. As consideration for services provided under the saleterm of up to $10 million inthe agreement, which extended through December 31, 2020, we issued 30,000 shares of ourunregistered common stock underfor a nonrefundable retainer for services valued at approximately $0.01 million. The value of the shelf registration statement (the “First ATM”). From January through March 2017, we sold an aggregatestock issued was recognized as a consulting expense over the term of 4.1 millionthe agreement. We are not obligated to register the shares of our common stock at an average price of $2.46 per share under the First ATM for net proceeds of approximately $9.6 million, after deduction of approximately $0.4 million in FBR fees and commissions, legal fees and other offering costs. resale.
On August 14, 2017,October 30, 2020, we entered into a new ATMconsulting services agreement with FBRa third-party to provide shareholder relations services. As consideration for services provided under the saletwelve-month term of the agreement, we issued 70,000 shares of unregistered common stock for a non-refundable retainer for services valued at approximately $0.02 million. The agreement included a CPR to receive up to approximately $4.4$0.02 million in shares of our common stock registered under the shelf registration statement (the “Second ATM”). From August to December 2017, we completed the sale of approximately 2.1 million shares of our common stockfrom patent-related proceeds. The CPR was recorded as debt at an average price of $1.50 under the Second ATM for net proceeds of approximately $3.0 million, after deduction of approximately $0.2 million in FBR fees and commissions, legal fees and other offering costs. From March to May 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 the Second ATM for aggregate net proceeds of approximately $1.1 million, after deductionits estimated fair value of approximately $0.1 million (see “unsecured contingent payment obligations” in FBR fees and commissions. 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).
Under the Equity Line Agreement, on any trading day selected by us, we have the right, in our sole discretion, to present Aspire Capital with a purchase notice, directing Aspire Capital to purchase up to 0.15 million shares of our common stock, provided that the aggregate purchase amount for such shares does not exceed $0.5 million and subject to the maximum aggregate amount of $20 million. The per share purchase price for each purchase notice is equal to the lesser of (i) the lowest sale price of our common stock on the purchase date; or (ii) the arithmetic average of the three lowest closing sale prices for our common stock during the ten consecutive trading days ending on the trading day immediately preceding the purchase date.
In addition, on any date on which we submit a purchase notice to Aspire Capital, we also have the right, in our sole discretion, to present Aspire Capital with a volume-weighted average price (“VWAP”) purchase notice directing Aspire Capital to purchase an amount of stock equal to up to 30% of the aggregate shares of our common stock traded on its principal market on the next trading day, or such lesser amount as we may determine. The purchase price per share pursuant to the VWAP purchase notice isgenerally 97% of the volume-weighted average price for our common stock traded on its principal market on the VWAP purchase date, subject to terms and limitations of the agreement.
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The number of shares that may be issued to Aspire Capital under the Equity Line Agreement was limited to that number of shares representing 19.99% of our pre-transaction shares outstanding (the “Exchange Cap”), unless shareholder approval was obtained or unless the average price for shares sold in excess of the Exchange Cap is equal or greater to $1.48 which represents the closing bid price of our common stock at the date we entered into the Equity Line Agreement. In June 2018, our shareholders approved the issuance of shares to Aspire Capital under the Equity Line Agreement in excess of 19.99% of our pre-transaction shares outstanding.
In 2017, we sold an aggregate of 0.77 million shares of our common stock to Aspire Capital under the Equity Line Agreement for aggregate net proceeds of approximately $0.96 million after deduction of legal and other offering costs of approximately $0.04 million. From January 2018 to June 2018, we sold an aggregate of 2.9 million shares of our common stock to Aspire Capital under the Equity Line Agreement for aggregate net proceeds of approximately $2.0 million. As of December 31, 2018, we had no registered shares available under the Equity Line Agreement. Upon registration of additional shares, and subject to the terms and conditions of the Equity Line Agreement, including a $0.50 per share minimum price, we have $16.9 million remaining under the Equity Line Agreement.
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. In February 2017, one of our directors purchased 0.1 million shares of our common stock in an unregistered sale of equity securities at a purchase price of $2.11 per share. Director purchases of our common stock were made at or above market price at the date of purchase (see Note 14)9).
Stock for Services
ForDuring the year ended December 31, 2017,2020, we issued an aggregate of 0.3 million100,000 shares of our unregistered common stock, valued at approximately $0.05 million, as compensation for shareholder awareness services provided by a third party. The agreement provides for future issuances of 50,000 shares for up to two consultantssuccessive three-month periods over the term of the agreement, unless the services are terminated in exchange for an aggregate ofaccordance with the agreement. In January 2021, we issued 50,000 shares valued at approximately $0.4$0.03 million in prepaid retainers for executive consulting and other advisory services. We have no registration obligation with respect to these shares.as the third quarterly payment under this agreement.
Common Stock 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 the CPIA (see Note 7). 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 have not yet been registered.
As of December 31, 2018,2020 and 2019, we had outstanding warrants for the purchase of up to 13.312.9 million shares and 12.2 million shares of our common stock, including Pre-Funded Warrants for the purchase of up to 2.9 million shares of our common stock.respectively. The estimated grant date fair value of these warrants of $1.8$1.7 million and $0.8$1.3 million at December 31, 20182020 and 2017,2019, respectively, is included in shareholders’ deficit in our consolidated balance sheets. As of December 31, 2018,2020, our outstanding warrants have an average exercise price of $0.39$0.45 per share and a weighted average remaining life of approximately fivethree years.
5552
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. In addition, a warrant for the purchase of 0.07 million shares with an exercise price of $3.25 per share expired unexercised in 2018. There were no warrant exercises or expirations for the year ended December 31, 2017 and no cash received from warrant exercises for 2018 or 2017.
Shareholder Protection Rights Agreement
On November 20, 2015,2020, we amendedadopted a second amendment to our Shareholder Protection Rights Agreement (“Rights Agreement”) dated November 21, 2005.2005, as amended. The amendment extends the expiration date of the Rights Agreement from November 21, 201520, 2020 to November 20, 20202023 and decreases the exercise price of the rights from $14.50 to $14.50 after giving effect to the one-for-ten reverse stock split that became effective March 30, 2016. $8.54.
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$8.54 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, 2020, there are no Series E preferred shares outstanding.
12.14. 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, 20182020 and 2017,2019, respectively (in thousands):
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| 2018 |
| 2017 | ||
Research and development expense | $ | 169 |
| $ | 564 |
Selling, general, and administrative expense |
| 831 |
|
| 1,600 |
Restructuring expense |
| 50 |
|
| - |
Total share-based compensation expense | $ | 1,050 |
| $ | 2,164 |
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56
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|
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| 2020 |
| 2019 | ||
Research and development expense | $ | - |
| $ | 5 |
Selling, general, and administrative expense |
| 1,244 |
|
| 584 |
Total share-based compensation expense | $ | 1,244 |
| $ | 589 |
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We did not capitalize any expense related to share-based payments. As of December 31, 2018,2020, there was $0.2$0.36 million of total unrecognized compensation cost related to all non-vested share-based compensation awards. That cost is expected to be recognized over a weighted-average period of approximately one year.0.5 years.
53
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. At December 31, 2020, 155,000 shares of common stock were available for future grants under the 2019 Plan. The 2019 Plan was amended in January 2021 (see Note 17).
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, providedprovides 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, 2018, 296,9522020, 25,627 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, 2018, 19,6732020, 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 as well as payment for services to third parties.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 and the life of the related service contract for third-party awards. The fair value of RSUs is generally based on the closing price of our common stock on the date of grant and is amortized to share-based compensation expense over the estimated life of the award, generally the vesting period. In the case of RSUs issued to third parties, the fair value is recognized based on the closing price of our common stock on each vesting date.
5754
RSAs and RSUs
The following table presents a summary of RSA and RSU activity under the 2000, 2008, 2011, and 20112019 Plans (collectively, the “Stock Plans”) as of December 31, 20182020 (shares in thousands):
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| Non-vested Shares | Non-vested Shares | ||||||
| Shares |
| Weighted-Average Grant Date Fair Value | Shares |
| Weighted-Average | ||
Non-vested at beginning of year | 521 |
| $ | 1.98 | - |
| $ | - |
Granted | 221 |
| 0.37 | 1,016 |
| 0.31 | ||
Vested | (629) |
| 1.42 | (829) |
| 0.31 | ||
Forfeited | (99) |
| 1.94 | - |
| - | ||
Non-vested at end of year | 14 |
| $ | 1.98 | 187 |
| $ | 0.33 |
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The total fair value of RSAs and RSUs vested under the Stock Plans for the year ended December 31, 2018 is2020 was approximately $0.3 million.
Stock Options
Stock options are issued as incentive compensation to executives, employees and non-employee directors, and third parties.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. In the case of option grants to third parties, the fair value is estimated at each interim reporting date until vested. Options for employees, including executives and non-employee directors, are generally granted under the Stock Plans.
The following table presents a summary of option activity under the Stock Plans for the year ended December 31, 20182020 (shares in thousands):
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| Shares |
| Weighted- |
| Weighted-Average |
| Aggregate | Shares |
| Weighted- |
| Weighted-Average |
| Aggregate | ||||||
Outstanding at beginning of year | 1,007 |
| $ | 10.82 |
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| 11,410 |
| $ | 0.33 |
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Granted | 507 |
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| 0.60 |
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| 843 |
| 0.31 |
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| |
Exercised | - |
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| - |
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| - |
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| - |
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Forfeited | (42) |
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| 1.59 |
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Expired | (244) |
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| 9.96 |
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Forfeited/Expired | (13) |
| 38.86 |
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Outstanding at end of year | 1,228 |
|
| 7.09 |
| 4.66 | years |
| $ | - | 12,240 |
|
| 0.28 |
| 5.5 | years |
| $ | 3,401 |
Vested and expected to vest at end of year | 849 |
| $ | 9.98 |
| 3.73 | years |
| $ | - | ||||||||||
Vested at end of year | 9,490 |
| $ | 0.31 |
| 5.5 | years |
| $ | 2,578 | ||||||||||
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The weighted average per share fair value of option sharesoptions granted during the years ended December 31, 20182020 and 20172019 was $0.46$0.27 and $1.52,$0.14, respectively. The total fair value of option shares vested was $0.5$0.9 million and $0.2$0.5 million for the yearsyear ended December 31, 20182020 and 2017,2019, respectively.
5855
The fair value of option grants under the Stock Plans for the years ended December 31, 20182020 and 2017,2019, respectively, was estimated using the Black-Scholes option-pricing model with the following assumptions:
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| Year ended December 31, | Year ended December 31, | ||||
| 2018 |
| 2017 | 2020 |
| 2019 |
Expected option term 1 | 5 to 6 years |
| 4 to 6 years | 5 years |
| 5 years |
Expected volatility factor 2 | 68.8% to 93.6% |
| 98.0% to 100.8% | 127.4% to 135.3% |
| 119.1% |
Risk-free interest rate 3 | 2.6% to 3.0% |
| 1.7% to 2.2% | 0.33% to 1.63% |
| 1.6% |
Expected annual dividend yield | 0% |
| 0% | 0% |
| 0% |
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1 The expected term was generally determined based on historical activity for grants with similar terms and for similar groups of employees and represents the period of time that options are expected to be outstanding. For employee options, groups of employees with similar historical exercise behavior are considered separately for valuation purposes. For consultants, the expected term was determined based on the contractual life of the award.
2 The stock volatility for each grant is measured using the weighted average of historical daily price changes of our common stock over the most recent period equal to the expected option life of the grant.
3 The risk-free interest rate for periods equal to the expected term of the share option is based on the U.S. Treasury yield curve in effect at the measurement date.
Options by Price Range
The options outstanding at December 31, 20182020 under all plans have exercise price ranges, weighted average contractual lives, and weighted average exercise prices are as follows (weighted average lives in years and shares in thousands):
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| Options Outstanding |
| Options Vested | ||||||||||
Range of Exercise Prices |
| Number Outstanding at December 31, 2018 |
| Wtd. Avg. Exercise Price |
| Wtd. Avg. Remaining Contractual Life |
| Number Exercisable at December 31, 2018 |
| Wtd. Avg. Exercise Price |
| Wtd. Avg. Remaining Contractual Life | ||
$0.60 - $1.23 |
| 502 |
| $ | 0.60 |
| 6.71 |
| 127 |
| $ | 0.61 |
| 6.65 |
$1.80 - $13.20 |
| 459 |
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| 2.43 |
| 4.65 |
| 455 |
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| 2.43 |
| 4.64 |
$13.80 - $22.60 |
| 28 |
|
| 14.05 |
| 2.48 |
| 28 |
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| 14.05 |
| 2.48 |
$23.80 - $38.80 |
| 230 |
|
| 28.25 |
| 0.55 |
| 230 |
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| 28.25 |
| 0.55 |
$45.10 - $45.10 |
| 9 |
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| 45.10 |
| 1.96 |
| 9 |
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| 45.10 |
| 1.96 |
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| 1,228 |
| $ | 7.09 |
| 4.66 |
| 849 |
| $ | 9.98 |
| 3.73 |
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| Options Outstanding |
| Options Vested | ||||||||||
Range of Exercise Prices |
| Number Outstanding at December 31, 2020 |
| Wtd. Avg. Exercise Price |
| Wtd. Avg. Remaining Contractual Life |
| Number Exercisable at December 31, 2020 |
| Wtd. Avg. Exercise Price |
| Wtd. Avg. Remaining Contractual Life | ||
$0.171 - $0.33 |
| 11,318 |
| $ | 0.18 |
| 5.6 |
| 8,624 |
| $ | 0.18 |
| 5.6 |
$0.50 - $0.60 |
| 513 |
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| 0.59 |
| 5.0 |
| 457 |
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| 0.60 |
| 4.8 |
$1.98 - $2.13 |
| 381 |
|
| 2.02 |
| 3.4 |
| 381 |
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| 2.02 |
| 3.4 |
$13.80 |
| 28 |
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| 13.80 |
| 0.5 |
| 28 |
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| 13.80 |
| 0.5 |
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| 12,240 |
| $ | 0.28 |
| 5.5 |
| 9,490 |
| $ | 0.31 |
| 5.5 |
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Upon exercise of options under all plans, we issue new shares of our common stock. For shares issued upon exercise of equity awards granted under the Stock Plans, the shares of common stock are registered. For shares issued upon exercise of non-plan awards, the shares are not registered unless they have been subsequently registered by us on a registration statement. We had no option exercises for the years ended December 31, 20182020 or 2017.2019.
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13. 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.”
Restructuring charges for the year ended December 31, 2018 include the following (in thousands):
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Termination Benefits
Accrued one-time termination benefits consist of the following (in thousands):
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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):
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60
14.15. RELATED PARTY TRANSACTIONS
We paid approximately $0.03$0.01 million and $0.03$0.02 million in 20182020 and 2017,2019, 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 and $0.07$0.1 million in 2018 and 2017, respectively2020 for principal and interest on an unsecured note payablethe SKGF Note (refer to “Note Payable to a Related Party” included Note 9). No payments were made in 2019 on the
56
SKGF (the “SGKF Note”).Note. The SKGF Note was issued in 2016, to convert outstanding unpaid fees tohas an unsecured promissory note. The SKGF Note was amended in January 2018 and August 2018 to defer principal payments. The SKGF Note allows for interest at 8% per annum and matures on March 31, 2020. At December 31, 2018, the outstanding balance, of the note, including accrued and unpaid interest, isof approximately $0.8 million (see Note 7).at December 31, 2020.
On September 10, 2018,In January 2020, we sold an aggregate of $0.4 millionissued 500,000 in promissory notes, convertible intounregistered shares of our common stock at a fixed conversion priceas an in-kind payment of $0.40approximately $0.08 million in outstanding amounts payable to related parties on the same terms as other convertible notes sold in the same transaction (see Note 7). Jeffrey Parker, our chief executive officer and chairman of the Board, Paul Rosenbaum, one of our directors since December 2016, and incoming independent director, Lewis Titterton, each purchased a convertible note with a face value of $0.1 million. In addition, Stacie Wilf, sister to Jeffrey Parker, purchased a convertible note with a face value of $0.1 million.
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. In February 2017, one of our directors, Mr. Paul Rosenbaum, purchased approximately 0.1 million shares of our common stock in an unregistered sale of equity securities at a purchase price of $2.11 per share (see Note 11).Parker.
15.16. CONCENTRATIONS OF CREDIT RISK
Financial instruments that potentially subject us to a concentration of credit risk principally consist of cash and cash equivalents, restricted cash equivalents, and our available for sale securities.equivalents. Cash and cash equivalents are primarily held in bank accounts and overnight investments. At times our cash balances on deposit with banks may exceed the balance insured by the F.D.I.C. Restricted cash equivalents are held in accounts with brokerage institutions and consist of short-term money market funds. Our available-for-sale securities are held in accounts with brokerage institutions and consist of mutual funds invested primarily in short-term municipal securities.
17. SUBSEQUENT EVENTS
Equity and Debt Financings
In January 2021, we consummated the sale, on a private placement basis, of 2,976,430 shares of our common stock at a price of $0.35 per share to accredited investors for aggregate proceeds of approximately $1.0 million. The securities purchase agreements include contingent payment rights identical to the CPRs issued in 2020 (see “unsecured contingent payment obligations” at Note 9). Approximately $0.4 million in proceeds for this transaction was received as of December 31, 2020 and recorded as an accrued liability until the consummation of the transaction (see Note 7). We entered into registration rights agreements with the investors pursuant to which we will register the shares. We maintain our investments with what management believeshave committed to be quality financial institutionsfile the registration statement by April 15, 2021 and while we limitto cause the registration statement to become effective by June 30, 2021. The registration rights agreements provide for liquidated damages upon the occurrence of certain events including failure by us to file the registration statement or cause it to become effective by the deadlines set forth above. The amount of credit exposurethe liquidated damages is 1.0% of the aggregate subscription upon the occurrence of the event, and monthly thereafter, up to any one institution,a maximum of 6%, or approximately $0.06 million.
In March 2021, we could be subjectconsummated the sale, on a private placement basis of 3,230,942 shares of our common stock and 1,619,289 warrants at a price of $1.29 per common share to credit risksaccredited investors for aggregate proceeds of approximately $4.2 million. The warrants have an exercise price of $1.75 per share and expire in March 2026. We entered into registration rights agreements with the investors pursuant to which we will register the shares. We have committed to file the registration statement within 30 days and to cause the registration statement to become effective within 90 days. The registration rights agreements provide for liquidated damages upon the occurrence of certain events including failure by us to file the registration statement or cause it to become effective by the deadlines set forth above. The amount of the liquidated damages is 1.0% of the aggregate subscription upon the occurrence of the event, and monthly thereafter, up to a maximum of 6%, or approximately $0.25 million. The majority of the proceeds from concentrationthis transaction were used to satisfy our obligations to Mintz (see “Mintz Agreement” below).
Share Based Compensation Arrangements
On January 11, 2021, the Board amended the 2019 Long-Term Incentive Plan to increase the number of investmentsshares of common stock reserved for issuance under the 2019 Plan from 12 million to 27 million shares.
The Board also approved grants, under the 2019 Plan, of two-year options, with an exercise price of $0.54 per share, vesting in a single fund as well as credit risks arising from adverse conditions in8 equal quarterly installments commencing on March 31, 2021 and expiring on January 11, 2026. The grants under the financial markets as a whole.
2019 Plan included an option to purchase 8,000,000 shares granted to Jeffrey Parker, an option to purchase 1,000,000 shares granted to Cynthia French, an option to
6157
16. SUBSEQUENT EVENTS
In Februarypurchase 380,000 shares to each of the three non-employee directors, and March 2019, we soldoptions to purchase an aggregate of $1.3 million in convertible notes2,900,000 shares granted to accredited investors. The notes mature five years fromother key employees.
On January 25, 2021, we amended our business consulting and retention agreement with Chelsea to increase the datecompensation for services over the remaining term and to extend the term of issuance and are convertible, at the holders’ option, intoagreement through February 2024. As consideration for the amended agreement, we issued 500,000 shares of ourunregistered common stock in exchange for a nonrefundable retainer for services valued at a fixed conversion priceapproximately $0.33 million. The value of $0.25 per share. The notes bear interest at a stated ratethe stock issued is being recognized as consulting expense over the term 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.the agreement.
On March 29,9, 2021, we granted approximately 32,000 shares under our 2019 Long-Term Incentive Plan to a consultant for business communications services over a one-year term valued at approximately $0.05 million.
Warrant and Option Exercises
During the three months ended March 31, 2021, we amended our promissoryreceived aggregate proceeds of $0. 4 million from the exercise of outstanding options and warrants at an average exercise price of $0.16 per share.
Mintz Agreement
As of December 31, 2020, we had approximately $3.1 million in accounts payable to Mintz and an outstanding balance of approximately $0.03 million on a secured note payable to SKGF to provideMintz for legal fees and expenses. In addition, we had approximately $3.6 million in disputed legal fees and expenses billed by Mintz that we treated as 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. In connection with this amendment, SKGF also waived any prior payment defaults under the note. As a result of this amendment, approximately $0.65 million of our obligation to SKGFloss contingency that was reclassified from current to long-term liabilitiesnot probable as of December 31, 2018. 2020 and 2019 and accordingly, for which we recognized no expense in the consolidated financial statements. In March 2021, we entered into an agreement with Mintz to satisfy our outstanding obligations and reduce any future contingency fees payable to Mintz. On March 29, 2021, we paid Mintz a lump-sum payment of $3.0 million in satisfaction of our outstanding obligations to Mintz including the Mintz note, our accounts payable to Mintz, and all disputed and unrecorded billings. Mintz waived all past defaults on the Mintz note and agreed to a significant reduction in future success fees payable to Mintz from patent-related proceeds.
Legal Proceedings
On March 26, 2021, the district court in the Middle District of Florida, Orlando Division, issued an order that, among other things, postponed our trial date in ParkerVision v. Qualcomm citing backlog due to the pandemic as a factor. A new trial date has not yet been set but is unlikely to be scheduled prior to November or December 2021 according to the court.
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Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
On April 9, 2018, we dismissed PricewaterhouseCoopers LLP (“PWC”) as the Company’s independent registered public accounting firm. The Audit Committee of our Board (the “Audit Committee”) participated in and approved the decision to change our independent registered public accounting firm.
PWC’s audit reports on our consolidated financial statements as of and for the years ended December 31, 2017 and 2016 did not contain an adverse opinion or a disclaimer of opinion and were not qualified or modified as to uncertainty, audit scope, or accounting principles, except that PWC’s reports for the years ended December 31, 2017 and 2016 included an explanatory paragraph regarding our ability to continue as a going concern.
During the years ended December 31, 2017 and 2016, and through the subsequent interim period through April 9, 2018, there were (i) no disagreements (as described in Item 304(a)(1)(iv) of Regulation S-K and the related instructions) between us and PWC on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedures, which, if not resolved to PWC’s satisfaction, would have caused PWC to make reference thereto in their reports on the consolidated financial statements for such years, and (ii) no “reportable events” within the meaning if Item 304(a)(1)(v) of Regulation S-K.
The Audit Committee appointed BDO USA, LLP (“BDO”) as our independent registered public accounting firm for our year ended December 31, 2018. During the fiscal years ended December 31, 2017 and 2016, and through the subsequent interim period through April 9, 2018, neither we nor anyone acting on our behalf consulted with BDO regarding (i) the application of accounting principles to a specific transaction, either completed or proposed, or the type of audit opinion that might be rendered on our financial statements, and neither a written report or oral advice was provided to us that BDO concluded was an important factor considered by us in reaching a decision as to any accounting, auditing, or financial reporting issue, (ii) any matter that was the subject of a disagreement within the meaning of Item 304(a)(1)(iv) of Regulation S-K, or (iii) any reportable event within the meaning of Item 304(a)(1)(v) of Regulation S-K.None.
Item 9A. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
Under Rules 13a-15(e) and 15d-15(e) of the Exchange Act, “disclosure controls and procedures” are controls and other procedures that are designed to ensure that the information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified under the rules and forms of the SEC. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that such information is accumulated and communicated to our management, including our chief executive officer and our chief financial officer, as appropriate to allow timely decisions regarding required disclosures. Our management, with the participation of our chief executive officer and our chief financial officer, has evaluated the effectiveness of our disclosure controls and procedures as of December 31, 2018.2020. Based on such evaluation, our chief executive officer and our chief financial officer have concluded that as of December 31, 2018,2020, our disclosure controls and procedures were effective.
Management’s Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting and for the assessment of the effectiveness of internal control over financial reporting. Under Rules 13a-15(f) and 15d-15(f) of the Exchange Act, “internal control over financial reporting’’ is defined
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as a process designed by, or under the supervision of, our chief executive officer and our chief financial officer, and effected by our board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of our financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.
Internal control over financial reporting includes policies and procedures that pertain to the maintenance of records, that in reasonable detail, accurately and fairly reflect our transactions and our dispositions of assets; provide reasonable assurance that transactions are recorded as necessary to permit preparation of our financial statements in accordance with generally accepted accounting; provide reasonable assurance that receipts and expenditures of the company are made only in accordance with authorizations of management and directors; and provide reasonable assurance regarding the prevention or the timely detection of the unauthorized acquisition, use or disposition of the company’s assets that could have a material effect on our financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies and procedures may deteriorate.
Management, with the participation of our chief executive officer and our chief financial officer, conducted an evaluation of the effectiveness of our internal control over financial reporting as of December 31, 20182020 using the criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013. Based on this evaluation, management concluded that our internal control over financial reporting was effective as of December 31, 2018. 2020.
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Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting during the fiscal quarter ended December 31, 20182020 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
In accordance with and satisfaction of the requirements of Form 8-K, we include the following disclosure:
On April 1, 2019,March 29, 2021, we issued a press release announcing our results of operations and financial conditionentered into securities purchase agreements (the “Purchase Agreements”) with the accredited investors identified on Exhibit 10.87 hereof (the “Investors”) for the year ended December 31, 2018.sale of an aggregate of 3,230,942 shares of common stock, $0.01 par value (“Shares”) and 1,619,289 warrants (“Warrants) at a price of $1.29 per Share for aggregate proceeds of $4.2 million. The press releaseWarrants are exercisable for a period of five years at an exercise price of $1.75 per share. The Purchase Agreements also contain customary representations and warranties of the Investors. Proceeds of $3.0 million were used to satisfy outstanding obligations with one of our litigation firms, including a reduction in future success fees owed to that firm. The remaining proceeds will be used for general working capital purposes.
We entered into registration rights agreements (the “Registration Rights Agreement”) with the Investors pursuant to which we will register the Shares and Warrant shares. We have committed to file the registration statement within 30 days and to cause the registration statement to become effective within 60 days (or, 90 days in the case of a review by the Commission). The Registration Rights Agreement provides for liquidated damages upon the occurrence of certain events including our failure to file the registration statement or cause it to become effective by the deadlines set forth above. The amount of the liquidated damages is attached hereto as Exhibit 99.1.1.0% of the aggregate subscription upon the occurrence of the event, and monthly thereafter, up to a maximum of 6%.
The foregoing information, includingShares and Warrants were offered and sold to the exhibit related thereto, is furnished in response to Item 2.02 of Form 8-K and shall not be deemed “filed” for purposes ofInvestors on a private placement basis under Section 184(a)(2) of the ExchangeSecurities Act nor shall it be deemed incorporatedof 1933, as amended, and Rule 506 promulgated thereunder.
The foregoing summaries of the Purchase Agreement, the Registration Rights Agreement and the Warrants are qualified in their entirety by reference in any disclosure documentto the full text of the Registrant, exceptagreements, which are attached as shall be expressly set forthExhibits 10.84, 10.85 and 10.86 hereto and are incorporated herein by specific reference in such document.
reference.
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Item 10. Directors, Executive Officers and Corporate Governance.
Directors
Our Board is divided into three classes with only one class of directors typically being elected in each year and each class serving a three-year term. In 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. Our current directors, including their backgrounds and qualifications are as follows:
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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 servedbeen the chief executive officer and co-founder of PathGuard, Inc. (or its predecessors), a company offering hardware-based cybersecurity, since 2015. From 2011 until December 2018, Mr. Newman served 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 director of Aspirational Consumer Lifestyle Corp (NYSE: ASPL), a special purpose acquisition company, since September 2020. He also serves as audit committee chair and a member of the compensation committee for ASPL. Mr. Newman has previously 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.
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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.
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Rosenbaum has been a member of the Providence St. Vincent Medical Foundation Council of Trustees, and previously served as president of the Council. In addition, from September 2000 until June 2009, Mr. Rosenbaum served as chairman and chief executive officer of Rentrak Corporation (“Rentrak”), a Nasdaq publicly traded company that provides transactional media measurement and analytical services to the entertainment and media industry. From June 2009 until July 2011, Mr. Rosenbaum served in a non-executive capacity as chairman of 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.
Robert G. Sterne
Robert Sterne has been a director of ours since September 2006 and also served as a director of ours from February 2000 to June 2003. Since 1978, Mr. Sterne has been a partner of the law firm of Sterne, Kessler, Goldstein & Fox PLLC, specializing in patent and other intellectual property law. Mr. Sterne provides legal services to us as one of our patent and intellectual property attorneys. Mr. Sterne has co-authored numerous publications related to patent litigation strategies. He has received multiple awards for contributions to intellectual property law including Law 360’s 2016 Top 25 Icons of IP and the Financial Times 2015 Top 10 Legal Innovators in North America. Among other qualifications, Mr. Sterne has an in-depth knowledge of our intellectual property portfolio and patent strategies and is considered a leader in best practices and board responsibilities concerning intellectual property.
Lewis H. Titterton
Lewis Titterton was appointed by the Board in September 2018 as a result of a vacancy created by our Board restructuring. 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
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Former Directors
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.
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
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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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Name |
| Age |
| Position with the Company |
Jeffrey Parker |
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| Chairman of the Board and Chief Executive Officer (“CEO”) |
Cynthia |
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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 PoehlmanFrench (formerly Poehlman)
Cynthia PoehlmanFrench has been our chief financial officer since June 2004 and our corporate secretary since August 2007. From March 1994 to June 2004, Ms. PoehlmanFrench was our controller and our chief accounting officer. Ms. PoehlmanFrench has been a certified public accountant in the state of Florida since 1989.
David Sorrells
David Sorrells has been our chief technical officer since September 1996 and served as our engineering manager from June 1990 to September 1996. He also served as a director of ours from January 1997 to June 2018. Mr. Sorrells is one of the leading inventors of our core technologies. He holds 190 U.S. patents and a number of corresponding foreign patents.
Gregory Rawlins
Gregory Rawlinshas been the chief technical officer for our Heathrow (Lake Mary) location since July 2017. Prior to July 2017, Dr. Rawlins served as our chief staff scientist since 2000 when we acquired Signal Technologies, Inc., a wireless and integrated circuit design engineering company that he founded in 1987 and where he served as chief executive officer. Dr. Rawlins has received several IEEE awards including Engineer of the Year in 1987, Entrepreneur of the Year in 1995, and Lifetime Achievement Award in Engineering in 2011. Dr. Rawlins is a named inventor on a number of our core patents.
Former Executive Officers
Prior to our restructuring in August 2018, Mr. John StuckeyMessrs. David Sorrells and Gregory Rawlins both served as our Chief MarketingTechnology Officers (“CTO”) through March 2020, at which time, given our reduced scope of operations, in particular our research and development activities, our Board determined to eliminate the Chief Technology Officer (“CMO”) from July 2017 to August 2018role. Both Mr. Sorrells and our vice president of corporate strategy and business development from July 2004 to July 2017. Prior to July 2004, Mr. Stuckey spent five years at Thomson,Rawlins remain employed by us in technical support roles.
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Inc. where he most recently served as director of business development.
Family Relationships
There are no family relationships among our officers or directors.
Delinquent Section 16(a) Beneficial Ownership Reporting ComplianceReports
Section 16(a) of the Exchange Act requires our officers, directors and persons who beneficially own more than ten percent of a registered class of our equity securitiescommon stock to file reports of ownership and changes in ownership with the SEC. Officers, directors and ten percent shareholders are charged by SEC regulation to furnish us with copies of all Section 16(a) forms they file.
Based solely upon oura review of the copies of such forms received by us and written representations received by the Company from certain reporting persons that no Forms 5 were required for those persons, we believe that during the fiscal year ended December 31, 2018 our executive officers, directors and ten percent shareholders filed2020 all reports required by Section 16(a) of the Exchange Act onfiling requirements were complied with in a timely basis, except for (i)manner, with the following exception: Messrs. Parker and Newman each inadvertently failed to timely file one Form 4 report disclosing the November 9, 2020 acquisition of shares of our common stock upon vesting of an RSU award. The relevant Form 4 reports were filed by Mr. Jeffrey Parker and Mr. Gregory Rawlins on June 8, 2018 which reported the May 31, 2018 vesting of previously granted RSUs; and (ii) Form 4 reports filed by Mr. David Sorrells and Mr. Gregory Rawlins on November 30, 2018 which reported the grant and vesting of RSUs awarded on November 16, 2018 in lieu of salary.February 10, 2021.
Code of Ethics
The Board has adopted a code of ethics applicable to all of our directors, officers and employees, including our chief executive officer and our chief financial and accounting officer, that is designed to deter wrongdoing and to promote honest and ethical conduct, full, fair, accurate, timely and understandable disclosure in reports that we file or submit to the SEC and in our other public communications, compliance with applicable government laws, rules and regulations, prompt internal reporting of violations of the code to an appropriate person designated in the code and accountability for adherence to the code. A copy of the code of ethics may be found on our website at www.parkervision.com.www.parkervision.com.
Shareholder Nominations
There have been no material changes to the procedures by which security holders may recommend nominees to our Board.
Audit Committee and Financial Expert
Prior to the resizing of our Board in September 2018, we had an audit committee that was comprised of three independent directors as determined in accordance with NasdaqMessrs. Paul Rosenbaum and our Board had determined that Mr. John Metcalf was an audit committee financial expert within the meaning of the rules and regulations of the SEC and was independent as determined in accordance with current Nasdaq listing standards for audit committee members. Prior to September 2018, the members of the audit committee were Messrs. Hightower, Metcalf, and der Torossian and Mr. Metcalf served as chairman of the audit committee.
Subsequent to our Board resizing in September 2018 and our delisting from Nasdaq in August 2018, we maintain an audit committee comprised of two independent directors. Messrs. Lewis Titterton and Paul RosenbaumFrank Newman serve as the members of our audit committee with Mr. Titterton serving as audit committee chairman.committee. Our audit committee is governed by a Board-approved charter which, among other things,
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establishes the audit committee’s membership requirements and its powers and responsibilities. Our Board has determined that Messrs. TittertonMr. Rosenbaum and RosenbaumMr. Newman are both audit committee financial experts within the meaning of the rules and regulations of the SEC.
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Item 11. Executive Compensation.
Summary Compensation Table
The following table summarizes the total compensation of each of our “named executive officers” as defined in Item 402(m) of Regulation S-K (the “Executives”) for the fiscal years ended December 31, 20182020 and 2017.2019. 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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Name and Principal Position | Year |
| Salary |
| Bonus ($) |
| Stock Awards |
| Option Awards |
| All Other |
| Total | ||||||
Jeffrey Parker, CEO | 2018 |
| $ | 297,500 |
| $ | - |
| $ | - |
| $ | - |
| $ | 24,000 | 5 | $ | 321,500 |
| 2017 |
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| 325,000 |
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| - |
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| 198,000 |
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| 31,012 |
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| 24,000 | 5 |
| 578,012 |
Cynthia Poehlman, CFO | 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 |
| 2017 |
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| 225,000 |
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| - |
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| 99,000 |
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| 31,012 | �� |
| 750 | 6 |
| 355,762 |
David Sorrells, CTO | 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 |
| 2017 |
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| 275,625 |
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| 1,003 |
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| - |
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| 31,012 |
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| 2,535 | 6 |
| 310,175 |
John Stuckey, CMO 3 | 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 |
| 2017 |
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| 250,000 |
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| - |
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| 99,000 |
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| 31,012 |
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| 1,263 | 6 |
| 381,275 |
Gregory Rawlins, CTO Heathrow | 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 |
| 2017 |
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| 250,000 |
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| - |
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| 99,000 |
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| 27,604 |
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| - |
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| 376,604 |
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Name and Principal Position | Year |
| Salary ($) |
| Bonus ($) |
| Stock Awards ($)(1) |
| Option Awards ($)(1) |
| All Other |
| Total | ||||||
Jeffrey Parker, CEO | 2020 |
| $ | 270,000 |
| $ | - |
| $ | 99,000 |
| $ | - |
| $ | 24,923 | 2 | $ | 393,923 |
| 2019 |
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| 260,000 |
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| - |
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| - |
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| 845,766 |
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| 24,000 | 2 |
| 1,129,766 |
Cynthia French, CFO | 2020 |
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| 186,923 |
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| - |
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| - |
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| 42,750 |
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| - |
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| 229,673 |
| 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 |
David Sorrells, Former CTO | 2020 |
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| 176,150 |
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| - |
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| 49,500 |
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| - |
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| - |
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| 225,650 |
| 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 |
Gregory Rawlins, Former CTO Heathrow | 2020 |
|
| 207,692 |
|
| - |
|
| 49,500 |
|
| - |
|
| - |
|
| 257,192 |
| 2019 |
|
| 200,000 |
|
| - |
|
| - |
|
| 105,721 |
|
| - |
|
| 305,721 |
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1. | There were 27 biweekly pay periods in 2020 compared to 26 in 2019 resulting in an increase in reported base salaries. |
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 12 to the consolidated financial statements for the year ended December 31, 2018 included in Item 8 for the assumptions made in the valuation of equity awards.
2. | 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, 2020 included in Item 8 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. | Represents an automobile allowance in the amount of $24,000, paid biweekly. The additional amount in 2020 is the result of 27 pay periods in 2020 compared to 26 in 2019. |
In August 2018,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 our Executives agreedMessrs. Rawlins and Sorrells and 150,000 share options at an exercise price of $0.33 per share to a 20% reductionMs. French. These awards vest over five quarters through May 2021. These awards were, in basepart, in consideration of continuing voluntary salary in connection with our planned restructuring. In addition, in 2018, we elected not to renew term life insurance policies previously provided on behalf of certain ofreductions by our Executives. The Executives were provided the option to
70
assume premium payments and ownership of those policies.
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 20182020 or 2017.2019.
64
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, 20182020 for each of our Executives:
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| Option Awards |
| Option Awards | Stock Awards | |||||||||||||||||
|
| Number of |
| Number of | Option |
| Option |
|
| Number of |
| Number of | Option |
| Option |
| Number of |
| Market Value | |||
Name |
| (a) |
| (b) | (c) |
| (d) |
|
| (a) |
| (b) | (c) |
| (d) |
| (e) |
| (f) | |||
Jeffrey Parker |
| 60,000 |
| - |
| 28.30 |
| 7/16/2019 |
|
| 20,000 | 1 | - |
| 1.98 |
| 8/15/2024 |
| 75,000 | 4 | $ | 36,000 |
|
| 20,000 |
| - |
| 1.98 |
| 8/15/2024 |
|
| 4,500,000 | 2 | 1,500,000 | 2 | 0.17 |
| 8/7/2026 |
| - |
|
| - |
Cynthia Poehlman |
| 12,500 |
| - |
| 28.30 |
| 7/16/2019 |
| |||||||||||||
Cynthia French |
| 20,000 | 1 | - |
| 1.98 |
| 8/15/2024 |
| - |
|
| - | |||||||||
|
| 750,000 | 2 | 250,000 | 2 | 0.17 |
| 8/7/2026 |
|
|
|
|
| |||||||||
|
| 20,000 |
| - |
| 1.98 |
| 8/15/2024 |
|
| 131,250 | 3 | 18,750 | 3 | 0.33 |
| 2/9/2027 |
| - |
|
| - |
David Sorrells |
| 30,000 |
| - |
| 28.30 |
| 7/16/2019 |
|
| 20,000 | 1 | - |
| 1.98 |
| 8/15/2024 |
| 37,500 | 4 | $ | 18,000 |
|
| 20,000 |
| - |
| 1.98 |
| 8/15/2024 |
| |||||||||||||
John Stuckey |
| 20,000 |
| - |
| 1.98 |
| 8/22/2019 |
| |||||||||||||
Gregory Rawlins |
| 12,500 |
| - |
| 28.30 |
| 7/16/2019 |
|
| 20,000 | 1 | - |
| 1.98 |
| 8/15/2024 |
| 37,500 | 4 | $ | 18,000 |
|
| 20,000 |
| - |
| 1.98 |
| 8/15/2024 |
|
| 562,500 | 2 | 187,500 | 2 | 0.17 |
| 8/7/2026 |
| - |
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| - |
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1 | Options vested over four equal quarterly periods from August 31, 2017 to May 31, 2018. |
2 | Options vest over eight equal quarterly periods from September 1, 2019 to June 1, 2021. |
3 | Options vested 50% on grant date and the remaining 50% over four equal quarterly periods beginning May 9, 2020. |
4 | Unvested RSUs vest 50% on February 9, 2021 and 50% on May 9, 2021. |
Director Compensation
Following our Board restructuring in
Since September 2018, the Board eliminated all cash fees for Board and committee service. Prior to our restructuring, our standard non-employee director compensation program provided for cash retainers for service on the Board and Board committees. Committee fees were structured in such a way as to provide distinction between compensation for committee members and chairpersons and between the responsibilitieshas consisted exclusively of the various committees. Each non-employee director was entitled to an annual cash retainer of $37,500. In addition, non-employee directors who served on the audit committee received an annual cash retainer of $7,500 ($15,000 for the committee chair). Non-employee directors who served on the compensation committee received an annual cash retainer of $5,000 ($10,000 for the committee chair). Non-employee directors who served on the nominating and corporate governance committee received an annual cash retainer of $2,500 ($5,000 for the committee chair).
Two of our directors, Messrs. Newman and Rosenbaum, who were appointed in December 2016 waived all cash fees for director and committee service through December 2018 and each received 50,000 share options and 50,000 RSUs. Twenty percent of the equity awards vested upon grant and the remaining
71
portion of the awards vested in eight equal quarterly increments through December 2018.
Our standard director compensation program generally includes annual equity-based compensation, to our non-employee directorsgenerally awarded annually, in the form of RSUs, nonqualified stock options, RSUs, or a combination thereof. Upon completion of the Board restructuring in September 2018, each of the non-employee directors received 125,000 nonqualified share options at an exercise price of $0.60 per share. The options vest in four equal increments over a one year period. DirectorUnvested director equity compensation awards are forfeited if the director resigns or is removed from the Board for cause prior to the vesting date. Nonqualified stock options generally expire seven year from grant date.
In February 2020, our non-employee directors were awarded, at their option, either 150,000 nonqualified stock options at an exercise price of $0.33 per share or an RSU for 150,000 shares. Messrs. Rosenbaum and Sterne opted to receive options, each with a grant-date fair value of approximately $43,000. Mr. Newman opted to receive a RSU with a grant date fair value of approximately $50,000. Each of the awards vest 50% upon grant with the remaining portion vesting in four equal quarterly installments from
65
May 2020 through February 2021. In addition, in February 2020, Mr. Sterne was awarded an immediately vested nonqualified stock option for the purchase of 100,000 shares at $0.33 per share, with an estimated grant-date fair value of approximately $29,000, as partial payment of accrued and unpaid fees for board and committee service prior to 2019. Mr. Sterne waived approximately $70,000 in additional accrued and unpaid fees.
We reimburse our non-employee directors for their reasonable expenses incurred in attending meetings and we encourage participation in relevant educational programs for which we reimburse all or a portion of the costs incurred for these purposes.
Directors who are also our employees are not compensated for serving on our Board.
The following table summarizes the compensation of our current and former non-employee directors for the year ended December 31, 2018. 2020.
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Name |
| Fees Earned or Paid in Cash ($) 1 |
| Stock Awards($) |
| Option Awards($) 2 |
| Total | ||||
(a) |
| (b) |
| (c) |
| (d) |
| (e) | ||||
Frank Newman 3 |
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| - |
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| - |
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| 57,621 |
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| 57,621 |
Paul Rosenbaum 3 |
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| - |
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| - |
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| 57,621 |
|
| 57,621 |
Robert Sterne 4 |
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| 26,667 |
|
| - |
|
| 57,621 |
|
| 84,288 |
Lewis Titterton 5 |
|
| - |
|
| - |
|
| 57,621 |
|
| 57,621 |
Papken der Torossian 6 |
|
| 36,667 |
|
| - |
|
| - |
|
| 36,667 |
William Hightower 6 |
|
| 33,333 |
|
| - |
|
| - |
|
| 33,333 |
John Metcalf 7 |
|
| 38,333 |
|
| - |
|
| - |
|
| 38,333 |
Nam Suh 7 |
|
| 30,000 |
|
| - |
|
| - |
|
| 30,000 |
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Name |
| Stock Awards($) 1 |
| Option Awards($) 1 |
| Total | |||
(a) |
| (b) |
| (c) |
| (d) | |||
Frank Newman 2 |
| $ | 49,500 |
| $ | - |
| $ | 49,500 |
Paul Rosenbaum 3 |
|
| - |
|
| 42,750 |
|
| 42,750 |
Robert Sterne 4 |
|
| - |
|
| 71,250 |
|
| 71,250 |
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| 1. | The amounts represented in columns (b) and (c) represent the full grant date fair value of share-based awards in accordance with ASC 718. Refer to Note 14 of the consolidated financial statements included in Item 8 for the assumptions made in the valuation of stock awards. |
2. | At December 31, 2020, Mr. Newman has an aggregate of 18,750 unvested RSUs and 975,000 nonqualified stock options outstanding, of which 775,000 are exercisable. |
3. | At December 31, 2020, Mr. Rosenbaum has an aggregate of 1,125,000 nonqualified stock options outstanding, of which 906,250 are exercisable. |
4. | At December 31, 2020, Mr. Sterne has 1,277,270 nonqualified stock options outstanding, of which 1,058,520 are exercisable. |
7266
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
Equity Compensation Plan Information
The following table gives information as of December 31, 20182020 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 | Number of securities to | Weighted-average | Number of securities |
| (a) |
| (c) | (a) |
| (c) |
Equity compensation plans approved by security holders (1) | 1,228 | $7.09 | 317 | |||
Equity compensation plans not approved by security holders | - | - | - | |||
Equity compensation plans approved by security holders 1,3 | 1,240 | $1.24 | 46 | |||
Equity compensation plans not approved by security holders 2,3 | 11,187 | 0.18 | 155 | |||
Total | 1,228 |
| 317 | 12,427 |
| 201 |
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|
1. | Includes the 2000 Plan, the 2008 Plan, and the 2011 Plan. |
2. | Includes the 2019 Plan. |
3. | The types of awards that may be issued under each of these plans is discussed more fully in Note 14 to our consolidated financial statements included in Item 8. |
1 Includes the 2000 Plan, the 2008 Plan and the 2011 Plan. The types of awards that may be issued under each of 67
these plans is discussed more fully in Note 12 to our consolidated financial statements included in Item 8.
Security Ownership of Certain Beneficial Holders
The following table sets forth certain information as of March 29, 201919, 2021 with respect to the stock ownership of (i) those persons or groups who beneficially own more than 5% of our common stock, (ii) each of our directors, (iii) each of our executive officers, and (iv) all of our directors and executive officers as a group (based upon information furnished by those persons).
As of March 29, 2019, 30,637,59119, 2021, 66,347,539 shares of our common stock were issued and outstanding.
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Name of Beneficial Owner |
| Amount and |
| Percent |
| Amount and |
| Percent |
>5% HOLDERS (EXCLUDING EXECUTIVE OFFICERS AND DIRECTORS) |
|
|
|
| ||||
GEM Partners, LP |
| 7,010,080 | 2 | 9.99% | ||||
Thomas Staz Revocable Trust |
| 4,015,429 | 3 | 6.05% | ||||
|
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| ||||
EXECUTIVE OFFICERS AND DIRECTORS |
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|
|
|
|
|
Jeffrey Parker 10 |
| 607,270 | 2 | 2.0% |
| 3,315,583 | 4 | 4.78% |
Cynthia Poehlman 10 |
| 82,693 | 3 | * | ||||
Gregory Rawlins 10 |
| 100,197 | 3 | * | ||||
David Sorrells 10 |
| 129,291 | 4 | * | ||||
Cynthia French 10 |
| 1,220,193 | 5 | 1.81% | ||||
Frank Newman 10 |
| 165,000 | 5 | * |
| 1,125,000 | 6 | 1.67% |
Paul Rosenbaum 10 |
| 815,838 | 6 | 2.6% |
| 1,850,602 | 7 | 2.73% |
Robert Sterne 10 |
| 233,311 | 7 | * |
| 1,273,035 | 8 | 1.88% |
Lewis Titterton 10 |
| 1,180,343 | 8 | 3.8% | ||||
All directors, director nominees and executive officers as a group (8 persons) |
| 3,313,943 | 9 | 10.4% | ||||
All directors and executive officers as a group (5 persons) |
| 8,784,413 | 9 | 11.87% | ||||
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* Less than 1%
1 Percentage is calculated based on all outstanding shares of common stock plus, for each person or group, any shares of common stock that the person or the group has the right to acquire within 60 days pursuant to options, warrants, conversion
1 Percentage is calculated based on all outstanding shares of common stock plus, for each person or group, any shares of common stock that the person or the group has the right to acquire within 60 days pursuant to options, warrants, conversion privileges or other rights. Unless otherwise indicated, each person or group has sole voting and dispositive power over all such shares of common stock.73
2 | GEM Investment Advisors, LLC (“GEM Advisors”) is the general partner of GEM Partners LP (“GEM”) and Flat Rock Partners LP (“FlatRock”). Mr. Daniel Lewis is the controlling person of GEM Advisors. GEM Advisors and Mr. Lewis have shared voting and dispositive power. Beneficial ownership includes (i) 4,899 shares held by FlatRock, (ii) 6,600 shares held by Mr. Lewis, (iii) 3,181,658 shares held by GEM, and (iv) 3,091,103 shares underlying convertible notes held by GEM, but excludes 6,685,000 shares underlying convertible notes held by GEM that are not convertible within 60 days due to exercise limitations. The principal business address of GEM Advisors, FlatRock, and Mr. Lewis is 100 State Street, Suite 2B, Teaneck, NJ 07666. Information derived from a Schedule 13G/A filed by GEM Advisors on March 9, 2021. |
3 | Thomas Staz is the trustee of the Thomas Staz Revocable Trust. The principal business address of the Thomas Staz Revocable Trust is 1221 Brickell Avenue, Suite 2660, Miami, Florida 33131. Information provided by beneficial holder on February 22, 2021. |
4 | Includes 2,970,000 shares of common stock issuable upon currently exercisable options, 190,824 shares held by Mr. Parker directly, 117,259 shares held by Jeffrey Parker and Deborah Parker Joint Tenants in Common, over which Mr. Parker has shared voting and dispositive power, and 37,500 RSUs subject to vest within 60 days. Excludes 7,750,000 shares of common stock issuable upon options that may become exercisable in the future. |
5 | Includes 1,170,000 shares of common stock issuable upon currently exercisable options and excludes 1,000,000 shares of common stock issuable upon options that may become exercisable in the future. |
6 | Includes 922,500 shares of common stock issuable upon currently exercisable options and excludes 432,500 shares of common stock issuable upon options that may become exercisable in the future. |
7 | Includes 1,072,500 shares of common stock issuable upon currently exercisable options and 250,000 shares of common stock issuable upon conversion of convertible notes. Excludes 432,500 shares of common stock 68
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|
8 | Includes 1,224,770 shares of common stock issuable upon currently exercisable options and excludes 432,500 shares of common stock issuable upon options that may become exercisable in the future. |
9 | Includes 7,359,770 shares of common stock issuable upon currently exercisable options, 37,500 RSUs subject to vest within 60 days, and 250,000 shares of common stock issuable upon conversion of convertible notes held by directors and officers and excludes 10,047,500 shares of common stock issuable upon options that may become exercisable in the future (see notes 4, 5, 6, 7 and 8 above). |
10 | The person’s address is 4446-1A Hendricks Avenue, Suite 354, Jacksonville, Florida 32207. |
Item 13. Certain Relationships and Related Transactions and Director Independence.
Related Party Transactions
We paid approximately $30,000$11,000 and $30,000$22,000 in 20182020 and 2017,2019, respectively for patent-related legal services to SKGF, of which Robert Sterne, is a partner. In addition, we paid approximately $59,000 and $66,000$110,000 in 2018 and 2017, respectively2020 for principal and interest on an unsecured note payable to SKGF (the “SKGF Note”).SKGF. The SKGF Notenote was issued in 2016 to convert outstanding unpaid legal fees to an unsecured promissory note. The SKGF Notenote was amended multiple times in January 2018 and August 20182019 to defer principal payments. The SKGF Notenote, as amended, allows for interest at 8%4% per annum, and matures March 31, 2020.monthly installments of $10,000 per month beginning January 2020, with a final balloon payment due on April 30, 2022. At December 31, 2018,2020, the outstanding balance of the note, including unpaid interest is $836,000.approximately $803,000.
On September 10, 2018,
In January 2020, we sold an aggregate of $400,000issued 500,000 in promissory notes, convertible intounregistered shares of our common stock at a fixed conversion priceas an in-kind payment of $0.40approximately $0.08 million in outstanding amounts payable to related parties on the same terms as other convertible notes sold in the same transaction. Jeffrey Parker, our chief executive officer and chairman of the Board, Paul Rosenbaum, one of our directors since December 2016, and incoming independent director, Lewis Titterton, each purchased a convertible note with a face value of $100,000. In addition, Stacie Wilf, sister to Jeffrey Parker, purchased a convertible note with a face value of $100,000.
On March 26, 2018 three of our directors purchased an aggregate of 200,000 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. In February 2017, one of our directors, Mr. Paul Rosenbaum, purchased 80,510 shares of our common stock in an unregistered sale of equity securities at a purchase price of $2.11 per share, which represented the closing bid price of our common stock on the purchase date.Parker.
74
Director Independence
We follow the rules of Nasdaq in determining if a director is independent. The Board also consults with our counsel to ensure that the Board’s determination is consistent with those rules and all relevant securities and other laws and regulations regarding the independence of directors. Prior to our restructuring, the Board affirmatively determined that Messrs. der Torossian, Hightower, Metcalf, Newman, Rosenbaum, Sterne and Suh were independent directors. After our restructuring, theThe Board has affirmatively determined that Messrs. Newman, Rosenbaum, Sterne and TittertonSterne are independent directors.
Item 14. Principal Accountant Fees and Services.
The firm of BDO USA, LLPMSL, P.A. acts as our principal accountants. PriorFrom April 2018 to April 2018,September 2019, the firm of PricewaterhouseCoopersBDO USA, LLP acted as our principal accountants (“Prior Accountants”). The following is a summary of fees paid to the principal accountants and Prior Accountants for services rendered.
Audit Fees. For the yearyears ended December 31, 2018,2020 and 2019, the aggregate fees billed by our principal accountants for professional services rendered for the audit of our annual financial statements, the review of our financial statements included in our quarterly reports, and services provided in connection with regulatory filings were approximately $316,700.$148,300 and $101,200, respectively. In addition, for the years ended December 31, 20182020 and 2017,2019, the aggregate fees billed by our Prior Accountants for professional services rendered in connection with the audit of our annual financial statements, the review of our financial statements included in our quarterly reports, and services provided in connection with regulatory filings were approximately $50,000$70,000 and $545,000,$188,700, respectively.
Audit Related Fees. For the years ended December 31, 20182020 and 2017,2019, there were no fees billed for professional services by our principal accountants or Prior Accountants for assurance and related services.
69
Tax Fees. For the yearyears ended December 31, 2018,2020 and 2019, there were no fees billed for professional services rendered by our principal accountants for tax compliance, tax advice or tax planning. For the year ended December 31, 2017, the aggregate fees billed by our Prior Accountants for professional services for tax compliance, tax advice or planning were approximately $4,975.
All Other Fees. For the yearyears ended December 31, 2018,2020 and 2019, there were no fees billed for other professional services by our principal accountants. For the year ended December 31, 2017, fees billed by our Prior Accountants for an accounting software license were $900.
All the services discussed above were approved by our audit committee. The audit committee pre-approves the services to be provided by our principal accountants, including the scope of the annual audit and non-audit services to be performed by the principal accountants and the principal accountants’ audit and non-audit fees.
7570
Item 15. Exhibits and Financial Statement Schedules.
(a) Documents filed as part of this report:
(1) Financial statements:
Consolidated Balance Sheets as of December 31, 20182020 and 20172019
Consolidated Statements of Comprehensive Loss for the years ended December 31, 20182020 and 20172019
Consolidated Statements of Shareholders’ Deficit for the years ended December 31, 20182020 and 20172019
Consolidated Statements of Cash Flows for the years ended December 31, 20182020 and 20172019
Notes to Consolidated Financial Statements for the years ended December 31, 20182020 and 20172019
(2) Financial statement schedules:
Not applicable.
(3) Exhibits.
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Exhibit |
| Description |
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3.1 |
| |
3.2 |
| |
3.3 |
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3.4 |
| |
3.5 |
| |
3.6 |
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3.7 | ||
3.8 | ||
3.9 |
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4.1 |
| |
4.2 |
| |
4.3 |
| |
| ||
4.6 |
| |
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72
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78
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| |
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| |
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| |
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| |
10.23 | ||
10.24 | ||
10.25 | ||
10.26 | ||
10.27 | ||
10.28 | ||
10.29 | ||
10.30 | ||
10.31 | ||
10.32 | ||
10.33 | ||
10.34 |
73
10.35 | ||
10.36 | ||
10.37 | ||
10.38 | ||
10.39 | 2019 Long-term Incentive Plan dated August 9, 2019, as amended * | |
10.40 | ||
10.41 | ||
10.42 | ||
10.43 | ||
10.44 | ||
10.45 | ||
10.46 | ||
10.47 | ||
10.48 | ||
10.49 | ||
10.50 | ||
10.51 | ||
10.52 | ||
10.53 |
74
10.54 | ||
10.55 | ||
10.56 | ||
10.57 | ||
10.58 | ||
10.59 | ||
10.60 | ||
10.61 | ||
10.62 | ||
10.63 | ||
10.64 | ||
10.65 | ||
10.66 | ||
10.67 | ||
10.68 | ||
10.69 | ||
10.70 | ||
10.71 |
75
10.72 | ||
10.73 | ||
10.74 | ||
10.75 | ||
10.76 | ||
10.77 | ||
10.78 | ||
10.79 | ||
10.80 | ||
10.81 | ||
10.82 | ||
10.83 | ||
10.84 | Form of Subscription Agreement between Registrant and Accredited Investors dated March 29, 2021 * | |
10.85 | ||
10.86 | Form of Warrant Agreement between Registrant and Accredited Investors dated March 29, 2021 * | |
10.87 | List of Accredited Investors to March 29, 2021 Subscription Agreement * | |
21.1 |
| |
23.1 |
| |
| ||
31.1 |
| |
31.2 |
| Rule 13a-14 and 15d-14 Certification of Cynthia L. |
32.1 |
| Section 1350 Certification of Jeffrey L. Parker and Cynthia L. |
76
|
| |
101.INS |
| XBRL Instance Document* |
101.SCH |
| XBRL Taxonomy Extension Schema* |
101.CAL |
| XBRL Taxonomy Extension Calculation Linkbase* |
79
101.DEF |
| XBRL Taxonomy Extension Definition Linkbase* |
101.LAB |
| XBRL Taxonomy Extension Label Linkbase* |
101.PRE |
| XBRL Taxonomy Extension Presentation Linkbase* |
* Filed herewith
** Management contract or compensatory plan or arrangement.
None.
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Pursuant to the requirements of Section 13 of the Exchange Act, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
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Date: |
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| PARKERVISION, INC. |
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| By: |
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| Jeffrey L. Parker |
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| Chief Executive Officer |
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Pursuant to the requirements of the Exchange Act, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
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Signature | Title | Date |
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By: /s/ Jeffrey L. Parker | Chief Executive Officer and |
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Jeffrey L. Parker | Chairman of the Board (Principal |
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| Executive Officer) |
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By: /s/ Cynthia L. | Chief Financial Officer (Principal |
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Cynthia L. | Financial Officer and Principal |
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| Accounting Officer) and Corporate Secretary |
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By: /s/ Frank N. Newman | Director |
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Frank N. Newman |
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By: /s/ Paul A. Rosenbaum | Director |
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Paul A. Rosenbaum |
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By: /s/ Robert G. Sterne | Director |
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Robert G. Sterne |
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