UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
(Mark One)
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For the fiscal year ended
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Commission file number
PARKERVISION, INC.
(Exact Name of Registrant as Specified in its Charter)
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| (State of Incorporation) | (I.R.S. Employer ID No.) |
(Address of Principal Executive Offices)
Registrant’s telephone number, including area code: (
Securities registered pursuant to Section 12(b) of the Act:
| Title of Each Class | Trading Symbol(s) | Name of Each Exchange on Which Registered |
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Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐
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 ☐
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.
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).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer ☐ | Accelerated filer ☐ |
| | Smaller reporting company |
| Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit reports.
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements.
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant's executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes
As of June 30, 2023, the aggregate market value of the registrant’s common stock, $.01 par value, held by non-affiliates of the registrant was approximately $
As of March 15, 2024,
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Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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Changes in and Disagreements with Accountants on Accounting and Financial Disclosure |
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Disclosure Regarding Foreign Jurisdictions that Prevent Inspections |
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Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters |
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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, unexpected changes in technologies and technological advances, 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 that may be made to any forward-looking statements to reflect anticipated events or circumstances occurring after the date of such statements.
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 current business plan is the enforcement of our intellectual property rights through licensing efforts and patent infringement litigation.
We currently have patent enforcement actions ongoing in various U.S. district courts against mobile handset, smart television and other WiFi product providers, as well as semiconductor 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 spent the majority of 2023 supporting our current patent enforcement actions. Beginning in 2020, we filed several patent enforcement cases in the Western District of Texas and, through 2023, we had entered into four patent license and settlement agreements with defendants, resulting in the dismissal of six pending actions. We currently have ten enforcement actions pending in Texas against five separate foreign defendants and one domestic defendant.
Additionally, we had two patent enforcement cases pending against Qualcomm in the Middle District of Florida. In March 2022, the district court in one of those cases granted several of Qualcomm's pre-trial motions, including a motion for summary judgment thus terminating the case prior to a jury trial. We appealed these decisions to the Federal Circuit and are currently awaiting the Federal Circuit's ruling. The second case which is pending against Qualcomm and Apple has been stayed pending the outcome of the first case. We also have a patent enforcement action against LG in the District of New Jersey that is stayed pending resolution of the Qualcomm and Apple case in Florida. See “Legal Proceedings” in Note 13 to our consolidated financial statements included in Item 8 for a detailed description of our various patent enforcement actions.
A significant portion of our litigation costs have been funded under a secured contingent payment arrangement with Brickell Key Investments, LP (“Brickell”), contingent arrangements with legal counsel, and various debt and equity 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 and Licenses
Since 2019, we have focused exclusively on our patent enforcement and licensing efforts. As of December 31, 2023, we had five licensees for our technologies, including one licensee added in 2023. All of our license agreements resulted from settlement of patent enforcement actions initiated by us. Our patent license and settlement agreements typically include a one-time, up-front payment to cover past and future use of our technologies, with no future recurring revenue. See “Revenue” in Note 3 to our consolidated financial statements included in Item 8 for additional details.
RF Technologies
Our RF technologies enable highly accurate transmission and reception of RF carriers at low power consumption, thereby enabling extended battery life, and 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, sales, and marketing resources. We believe we can secure licensing agreements with unauthorized current users of one or more of our technologies based on a solid and defensible patent portfolio and the advantages enabled by our unique patent-protected technologies.
Patents and Trademarks
We consider our intellectual property, including patents, patent applications, trademarks, and trade secrets to be significant to our 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, 2023, we had approximately 50 active U.S. and foreign patents related to our RF technologies. In addition, we have over 50 patents that have expired over the past five years that we believe continue to have significant economic value as a result of our ability to assert past damages in our patent 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 expiration dates ranging from 2024 to 2036.
Employees
As of December 31, 2023, we had seven full-time employees and one part-time employee. We also outsource certain specialty services, such as information technology and public relations, and utilize contract staff and third-party consultants from time to time to supplement our workforce. Our employees are not represented by any collective bargaining agreements and we consider our employee relations to be satisfactory.
Following the COVID-19 pandemic, we reverted to fully remote worksites for all of our employees. Our management, with the oversight of our board of directors, monitors the hiring, retention, and management of our employees.
Available Information and Access to Reports
We file annual reports on Forms 10-K, quarterly reports on Forms 10-Q, proxy statements and other reports, including any amendments thereto, electronically with the SEC. The SEC maintains an Internet site (http://www.sec.gov) where these reports may be obtained at no charge. 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 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.
In addition to other risks and uncertainties described in this Annual Report, the following risk factors should be carefully considered in evaluating our business because such factors may have a significant impact on our business, operating results, liquidity and financial condition. As a result of the risk factors set forth below, actual results could differ materially from those projected in any forward-looking statements.
Financial and Operating Risks
Our financial condition raises substantial doubt as to our ability to continue as a going concern.
We have had significant losses in prior years resulting in an accumulated deficit at December 31, 2023, of approximately $433.7 million. Although we generated $10.8 million in cash flow from operations for the year ended December 31, 2023, our debt repayment obligations exceeded our operating cash flows and we relied on new borrowings to fund a portion of our operations in 2023. There can be no guarantee that we will continue to generate positive cash flows from operations or that those cash flows will be sufficient to meet our debt obligations as they come due. Our independent registered public accounting firm has included in their audit opinion on our consolidated financial statements as of and for the year ended December 31, 2023, a statement with respect to substantial doubt about our ability to continue as a going concern. Note 2 to our consolidated financial statements included in Item 8 includes a discussion regarding our liquidity and our ability to continue as a going concern. Our consolidated financial statements have been prepared assuming we will continue to operate as a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. If we become unable to continue as a going concern, we may have to liquidate our assets and the values we receive for our assets in liquidation or dissolution could be significantly lower than the values reflected in our consolidated financial statements. The substantial doubt as to our ability to continue as a going concern may adversely affect our ability to negotiate reasonable terms with our 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.
Through December 31, 2022, our technologies and products did not produce revenues sufficient to cover our operating costs. We will continue to make expenditures on patent protection and enforcement and general operations in order to continue our current patent enforcement and licensing efforts. Although we recognized sufficient revenues from patent licensing and settlement agreements to cover our operating costs and achieve profitability in 2023, required repayments of contingent expenses and debt obligations have resulted in insufficient capital resources for sustainment of our operations through 2024. If we are not able to generate sufficient capital resources, we may 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 a history of net losses and negative cash flow from operations, we have funded our operating costs primarily from the sale of debt and equity securities, including our secured and unsecured contingent debt obligations. Our current capital resources include cash and cash equivalents of $2.6 million at December 31, 2023, which are insufficient to meet our working capital needs for the twelve months after issuance of our consolidated financial statements. Our business plan will continue to require expenditures for patent protection and enforcement and general operations. If we do not generate sufficient revenues from our licensing and patent enforcement programs, we will require additional capital to fund our operations. Additional capital may be in the form of debt securities, the sale of equity securities, including common or preferred stock, additional litigation funding, or a combination thereof. Failure to raise additional capital may have a material adverse impact on our ability to achieve our business objectives.
Raising additional capital by issuing debt securities or additional equity securities may result in dilution and/or impose covenants or restrictions that create operational limitations or other obligations.
We will require additional capital to fund our operations and meet our current obligations due within the twelve months after the issuance date of our consolidated financial statements. Financing, if any, may be in the form of debt or sales of equity securities, including common or preferred stock. Debt instruments or the sale of preferred stock may result in the imposition of operational limitations and other covenants and payment obligations, any of which may be burdensome to us and may have a material adverse impact on our ability to implement our business plan as currently formulated. The sale of equity securities, including common or preferred stock, may result in dilution to the current stockholders’ ownership and may be limited by the number of shares we have authorized and available for issuance.
We may be obligated to repay outstanding notes at a premium upon the occurrence of an event of default.
We have $4.9 million in outstanding principal under convertible notes at December 31, 2023. If we fail to comply with the various covenants set forth in each of the notes, including failure to pay principal or interest when due or consummating a change in control, we could be in default thereunder. Upon an event of default under each of the notes, the interest rate of the notes will increase to 12% per annum and the outstanding principal balance of the notes plus all accrued unpaid interest may be declared immediately payable by the holders. We may not have sufficient available funds to repay the notes upon an event of default, and we cannot provide assurances that we will be able to obtain other financing at terms acceptable to us, or at all.
Our ability to utilize our tax benefits could be substantially limited if we fail to generate sufficient income or if we experience an “ownership change.”
We have cumulative net operating loss carryforwards (“NOLs”) totaling approximately $279.8 million at December 31, 2023, of which $239.1 million is subject to expiration in varying amounts from 2024 to 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 (“Section 382”). In general, an ownership change under Section 382 occurs if one or more 5% shareholders increase their collective ownership of the aggregate amount of our outstanding shares by more than 50 percentage points over a relevant lookback period. We have sold a significant number of equity securities over the relevant lookback period which increases the risk of triggering an ownership change under Section 382 from the future sale of additional equity securities. An ownership change under Section 382 will significantly limit our ability to utilize our tax benefits.
Our litigation funding arrangements may impair our ability to obtain future financing and/or generate sufficient cash flows to support our future operations.
We have funded much of our cost of litigation through contingent financing arrangements with Brickell Key Investments LP (“Brickell”) and others and contingent fee arrangements with legal counsel. The repayment obligation to Brickell is secured by the majority of our assets. Furthermore, our contingent arrangements will result in reductions in the amount of net proceeds retained by us from litigation, licensing, and other patent-related activities. The contingent fees payable to legal counsel, Brickell and others will consume all of our initial future proceeds up to specified limits and will likely exceed half of our proceeds thereafter depending on size and timing of proceeds, among other factors. The long-term continuation of our business plan is dependent upon our ability to secure sufficient financing to support our business, and our ability to generate revenues and/or patent related proceeds sufficient to offset expenses and meet our contingent payment obligations. Failure to generate revenue or other patent-related proceeds sufficient to repay our contingent obligations may impede our ability to obtain additional financing which will have a material adverse effect on our ability to achieve our long-term business objectives.
Our litigation can be time-consuming, costly and we cannot anticipate the results.
Since 2011, we have spent a significant amount of our financial and management resources to pursue patent infringement litigation against third parties. We believe this litigation, and other litigation matters that we may in the future determine to pursue, will 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 or that our financial resources will not be exhausted before achieving a favorable outcome. In addition, even if we obtain favorable interim rulings or verdicts in particular litigation matters, they may not be predictive of the ultimate resolution of the matter. Unfavorable outcomes could result in exhaustion of our financial resources and could hinder our ability to pursue licensing and/or product opportunities for our technologies in 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.
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 Patent Trial and Appeal Board has issued a number of rulings invalidating challenged claims of certain of our patents as a result of third-party challenges filed by defendants in our patent enforcement actions. If our patents are shown not to be as broad as currently believed or are otherwise challenged such that some or all of the protection is lost, we will suffer adverse effects from the loss of competitive advantage and our ability to offer unique products and technologies. As a result, there would be an adverse impact on our financial condition and business prospects. Furthermore, defending against challenges to our patents may give rise to material costs for defense and divert resources away from our other activities.
Our business, results of operations, and financial condition may be impacted by risks related to pandemics and other similar outbreaks.
The COVID-19 pandemic created significant volatility and uncertainty in financial markets and negatively impacted the timing of our current patent enforcement actions as a result of travel restrictions, office closures and court closures. Future pandemics or other similar outbreaks could likewise adversely impact our business, results of operations and financial condition. For example, market volatility and uncertainty could impact our ability to raise additional capital on terms that are acceptable to us, or at all. Additionally, business shut-downs, court closures, and travel restrictions resulting from future outbreaks could cause material delays in our patent enforcement and licensing program which is currently our sole source of revenue. The extent to which future pandemics or similar outbreaks impact our ongoing business strategy, as well as our results of operations and financial condition, generally, will depend on future developments which are highly uncertain and cannot be predicted, including the severity and duration of the outbreak and the actions taken by governments and private businesses to contain or treat its impact, among others. If the disruptions posed by future pandemics or outbreaks continue for an extensive period of time, our business, results of operations, and financial condition may be materially adversely affected.
We are subject to outside influences beyond our control, including new legislation that could adversely affect our licensing and enforcement activities and have an adverse impact on the execution of our business plan.
Our licensing and enforcement activities are subject to numerous risks from outside influences, including new legislation, regulations and rules related to obtaining or enforcing patents. For instance, the U.S. has enacted sweeping changes to the U.S. patent system including changes that transition the U.S. from a “first-to-invent” to a “first-to-file” system and other changes that alter the processes for challenging issued patents. To the extent that we are unable to secure patent protection for our future technologies and/or our current patents are challenged such that some or all of our protection is lost, we will suffer adverse effects to our ability to offer unique products and technologies. As a result, there would be an adverse impact on our financial position, results of operations and cash flows and our ability to execute our business plan.
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 limited financial resources, we have ceased our research and development activities which could result in a loss of future market opportunity which could adversely affect our future revenue potential.
We are highly dependent on Mr. Jeffrey Parker as our chief executive officer. If his services were lost, it would have an adverse impact on the execution of our business plan.
Because of Mr. Parker’s leadership position in the Company, the relationships 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.
If we are unable to retain key highly skilled employees, we will not be able to execute our current business plans.
Our business is dependent on having skilled and specialized key employees to conduct our business activities. The inability to retain these key employees would have an adverse impact on the technical support activities and the financial reporting and regulatory compliance activities that our business requires. These activities are instrumental to the successful execution of our business plan.
Any disruptions to our information technology systems or breaches of our network security could interrupt our operations, compromise our reputation, and expose us to litigation, government enforcement actions, and costly response measures and could have a material adverse effect on our business, financial condition, and results of operations.
We rely on information technology systems, including third-party hosted servers and cloud-based servers, to keep business, financial, and corporate records, communicate internally and externally, and operate other critical functions. If any of our internal systems or the systems of our third-party providers are compromised due to computer virus, unauthorized access, malware, and the like, then sensitive 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 and warrants may affect the market price and liquidity of the common stock.
At December 31, 2023, we had 87.7 million shares of common stock outstanding and had outstanding options and warrants for the purchase of up to 36.4 million additional shares of common stock, of which approximately 35.2 million were exercisable as of December 31, 2023. In addition, as described more fully below, holders of convertible notes may elect to receive up to 36.4 million shares of common stock upon conversion of the notes, and we may elect to pay accrued interest on the notes in shares of our common stock. The majority of the shares of common stock underlying these securities are currently registered for sale to the holder or for public resale by the holder. The amount of common stock reserved for issuance may have an adverse impact on our ability to raise capital and may affect the price and liquidity of our common stock in the public market. In addition, the issuance of these shares of common stock will have a dilutive effect on current stockholders’ ownership.
The conversion of outstanding convertible notes into shares of common stock, and the issuance of common stock by us as payment of accrued interest upon the convertible notes, could materially dilute our current stockholders.
We have an aggregate principal amount of $4.9 million in convertible notes outstanding at December 31, 2023. The notes are convertible into shares of our common stock at fixed conversion prices, which may be less than the market price of our common stock at the time of conversion. If the entire principal were converted into shares of common stock, we would be required to issue an aggregate of up to 36.4 million shares of common stock. If we issue all of these shares, the ownership of our current stockholders will be diluted.
Further, we may elect to pay interest on the notes, at our option, in shares of common stock, at a price equal to the then-market price for our common stock. From 2018 to 2023, we issued an aggregate of approximately 7.3 million shares of common stock as in-kind interest payments on our convertible notes. We currently do not believe that we will have the financial ability to make payments on the notes in cash when due. Accordingly, we currently intend to make such payments in shares of our common stock to the greatest extent possible. Such interest payments could further dilute our current stockholders.
The price of our common stock may be subject to substantial volatility.
The trading price of our common stock has been and may continue to be volatile. Between January 1, 2022 and March 1, 2024, the reported high and low sales prices for our common stock ranged between $0.07 and $1.20 per share. The price of our common stock may continue to be volatile as a result of a number of factors, some of which are beyond our control. These factors include, but are not limited to, developments in outstanding litigation, our performance and prospects, general conditions of the markets in which we compete, economic and financial conditions, and the impact of future pandemics on global financial markets. Such volatility could materially and adversely affect the market price of our common stock in future periods.
Our common stock is quoted on OTCQB, an over-the-counter market. There can be no assurance that our common stock will continue to trade on the OTCQB or on another over-the-counter market or securities exchange.
Our common stock began trading on the OTCQB, an over-the-counter market, in August 2018 immediately following delisting from Nasdaq, under the symbol “PRKR”. The over-the-counter market is a significantly more limited market than a nationally-recognized securities exchange such as Nasdaq, and the quotation of our common stock on the over-the-counter market has resulted in a less liquid market available for existing and potential stockholders to trade shares of our common stock. Securities traded in the over-the-counter market generally have less liquidity due to factors such as the reduced number of investors that will consider investing in the securities, the reduced number of market makers in the securities, and the reduced number of securities analysts that follow such securities. As a result, holders of shares of our common stock may find it difficult to resell their shares at prices quoted in the market or at all. We are also subject to additional compliance requirements under applicable state laws relating to the issuance of our securities. This could have a long-term adverse effect on our ability to raise capital, which ultimately could adversely affect the market price of our common stock. We cannot provide any assurances as to if or when we will be in a position to relist our common stock on a nationally-recognized securities exchange.
Our common stock is classified as a “penny stock” under SEC rules, which means broker-dealers who make a market in our stock will be subject to additional compliance requirements.
Our common stock is deemed to be a "penny stock" as defined in the Securities Exchange Act of 1934 (the “Exchange Act”). Penny stocks are stocks (i) with a price of less than five dollars per share; (ii) that are not traded on a recognized national exchange; (iii) whose prices are not quoted on an automated quotation system sponsored by a recognized national securities association; or (iv) whose issuer has net tangible assets less than $2,000,000 (if the issuer has been in continuous operation for at least three years); or $5,000,000 (if continuous operations for less than three years); or with average revenues of less than $6,000,000 for the last three years. The Exchange Act requires broker-dealers dealing in penny stocks to provide potential investors with a document disclosing the risks of penny stocks and to obtain a manually signed and dated written receipt of the document before effecting any transaction in a penny stock for the investor’s account. Potential investors in our common stock are urged to obtain and read such disclosure carefully before purchasing any shares that are deemed to be “penny stock.” Further, the Exchange Act requires broker-dealers dealing in penny stocks to approve the account of any investor for transactions in such stocks before selling any penny stock to that investor. These procedures require the broker-dealer to (i) obtain from the investor information concerning his, her or its financial situation, investment experience and investment objectives; (ii) reasonably determine, based on that information, that transactions in penny stocks are suitable for the investor, and that the investor has sufficient knowledge and experience as to be reasonably capable of evaluating the risks of penny stock transactions; (iii) provide the investor with a written statement setting forth the basis on which the broker dealer made the determination in (ii) above; and (iv) receive a signed and dated copy of such statement from the investor, confirming that it accurately reflects the investor’s financial situation, investment experience and investment objectives. Compliance with these requirements may affect the ability or willingness of broker-dealers to sell our securities, and accordingly would affect the ability of stockholders to sell their securities in the public market. These additional procedures could also limit our ability to raise additional capital in the future.
We do not currently pay dividends on our common stock and thus stockholders must look to appreciation of our common stock to realize a gain on their investments.
We do not currently pay dividends on our common stock and intend to retain our cash and future earnings, if any, to fund our business plan. Our future dividend policy is within the discretion of our board of directors and will depend upon various factors, including our business, financial condition, results of operations and capital requirements. We therefore cannot offer any assurance that our board of directors will determine to pay special or regular dividends in the future. Accordingly, unless our board of directors determines to pay dividends, stockholders will be required to look to appreciation of our common stock to realize a gain on their investment. There can be no assurance that this appreciation will occur.
Provisions in our certificate of incorporation and by-laws could have effects that conflict with the interest of shareholders.
Some provisions in our certificate of incorporation and by-laws could make it more difficult for a third party to acquire control of us. For example, our board of directors is divided into three classes with directors having staggered terms of office, our board of directors has the ability to issue preferred stock without shareholder approval, and there are advance notification provisions for director nominations and submissions of proposals from shareholders to a vote by all the shareholders under the by-laws. Florida law also has anti-takeover provisions in its corporate statute.
Item 1B. Unresolved Staff Comments.
Not applicable.
For purposes of the following disclosure, the terms "cybersecurity incident" and "cybersecurity threat" have the meanings given to such terms in Item 106 of Regulation S-K promulgated under the Securities Exchange Act of 1934.
Given the small size of our organization, we leverage a third-party information technology ("IT") service provider for management of our information systems needs. Our IT service provider works closely with executive management in the assessment, identification and management of cybersecurity threats. Cybersecurity threats are prevented and detected by multiple approaches, including perimeter defense, vulnerability management, intrusion testing, multifactor authentication and data protection. We are in the process of developing a formal cybersecurity awareness program that will include cybersecurity training for all employees and relevant contractors and will be integrated with our overall risk management process. Material risks from cybersecurity threats, including those associated with the use of third-party service providers, are assessed during our annual review of our enterprise risks and related controls.
Our overall Board of Directors ("Board") has oversight of all enterprise risks, including those arising from cybersecurity threats. The Board has not assigned that responsibility to any committee or subcommittee of the Board. Assessments of ongoing and emerging enterprise risks, including cybersecurity threats, if applicable, are an integral part of our regularly scheduled Board meetings.
We have an informal cyber incident response plan for mitigating and remediating cybersecurity threats and incidents. Any identified cybersecurity threats and incidents are promptly reported to executive management who, along with our IT professionals, will assess the severity of the event and formulate a response. Our determination of the severity of a cybersecurity incident would generally include an evaluation of the incident's effect on the Company, including (i) our business strategy, results of operations, or financial condition, (ii) the integrity, confidentiality, resiliency, and security of our networks and systems, and (iii) our operations. Based on the severity of the event, the Board will be notified and will provide strategic direction through the incident response and communication.
We rely on technology in all aspects of our business, including information systems of our third-party service providers. The information systems upon which we depend have been, and likely continue to be, subject to cybersecurity threats such as unauthorized access attempts, business email compromise, phishing, malware, ransomware, hacking and other cyberattacks attempting to disrupt operations. Our dependence on these information systems exposes us to cyberattacks, both directly and through cyberattacks impacting our service providers. A significant cybersecurity incident could result in service interruptions, security events, regulatory compliance failures, the inability to protect employee or corporate information or assets against unauthorized access or use, or other operational difficulties. As described above, we continuously monitor our cybersecurity threats, including risks associated with our use of service providers. We are not aware of any risks from cybersecurity threats, or previous cybersecurity incidents, that have materially affected or are reasonably likely to materially affect our business strategy, results of operations, or financial condition.
Since November 2020, we have operated in a fully remote worksite environment for all of our employees. We believe a remote work environment is currently suitable for the conduct of our business.
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 Note 13 to our consolidated financial statements included in Item 8.
Item 4. Mine Safety Disclosures.
Not applicable.
Item 5. Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
Market Information
Our Common Stock is 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 15, 2024, we had approximately 84 holders of record and we believe there are approximately 6,500 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 year ended December 31, 2023.
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 based on those technologies, and we license our technologies to others for use in wireless communication products. We have expended significant financial and other resources to research and develop our RF technologies and to obtain patent protection for those technologies in the U.S. and certain foreign jurisdictions. We believe certain patents protecting our proprietary technologies have been broadly infringed by others and therefore our business plan primarily consists of enforcement of our intellectual property rights through patent licensing efforts and infringement litigation. We currently have patent enforcement actions ongoing in various U.S. district courts against mobile handset, smart television and other WiFi product providers, as well as semiconductor 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.
We continue to aggressively pursue licensing opportunities with wireless communications companies that make, use or sell semiconductors 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. Our licensing efforts to date have required litigation in order to enforce and/or defend our intellectual property rights. Since 2011, we have been involved in patent infringement litigation against Qualcomm and subsequently others for the unauthorized use of our technology. Refer to Note 13 to our consolidated financial statements included in Item 8 for a complete discussion of our legal proceedings. We have expended significant resources since 2011 and incurred significant debt for the enforcement and defense of our intellectual property rights. As of December 31, 2023, we had five licensees for our technologies, including one licensee added in 2023.
Recent Developments
On November 6, 2023, we presented oral arguments in our appeal of the ParkerVision v. Qualcomm district court rulings that ended our district court case in Orlando, Florida in March 2022. We are currently awaiting a ruling from the appellate court.
Liquidity and Capital Resources
With the exception of the year ended December 31, 2023, we have incurred significant losses from operations and negative cash flows in every year since inception, largely as a result of our significant investments in developing advanced technologies and protecting our intellectual property. We have utilized the proceeds from sales of debt and equity securities and contingent funding arrangements with third parties to fund our operations, including the cost of litigation to enforce our intellectual property rights.
At December 31, 2023, we had cash and cash equivalents of approximately $2.6 million, working capital of $0.4 million, and an accumulated deficit of approximately $433.7 million. Despite the net income and cash flows generated during the year ended December 31, 2023, a significant amount of future proceeds that we may receive from our patent enforcement and licensing programs will first be utilized to repay borrowings, legal fees, and litigation expenses under our contingent funding arrangements. In addition, we have approximately $1.5 million in convertible debt that, if not converted, will mature between June 2024 and January 2025. 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 generated cash from operations of approximately $10.8 million for the year ended December 31, 2023 and used cash for operations of $3.0 million for the year ended December 31, 2022. The increase in cash generated from operations from 2022 to 2023 is primarily due to proceeds received from the patent license and settlement agreement entered into in February 2023, net of contingent legal fees and expenses paid.
We made payments of $13.9 million on our secured contingent payment obligation during the year ended December 31, 2023, and paid approximately $0.3 million and $0.1 million in other debt obligations during the years ended December 31, 2023 and 2022, respectively. For the year ended December 31, 2023, we received aggregate proceeds from new borrowings under our secured contingent payment obligation of $5.0 million and aggregate net proceeds from issuance of convertible debt, equity financings, and option exercises of approximately $0.9 million, compared to approximately $2.1 million in proceeds from issuance of convertible debt, equity financings, and option exercises for the year ended December 31, 2022.
Significant portions of our litigation costs to date have been funded by contingent payment arrangements with legal counsel. Fee discounts offered by legal counsel in exchange for contingent payments upon successful outcome in our litigation are not recognized in expense until such time that the related proceeds on which the contingent fees are payable are considered probable. Contingent fees vary based on each firm’s specific fee agreement. We currently have contingent fee arrangements in place for all of our active cases. In addition to our contingent fee agreements with legal counsel, we have secured and unsecured contingent payment obligations to third parties that have priority payments due from patent-related proceeds as discussed more fully under “Financial Condition - Contingent Payment Obligations” below.
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 at least until the first $5.8 million of outstanding principal under our secured contingent payment obligation has been repaid. After repayment of $5.8 million in principal, we estimate that at least 75% of future proceeds could be payable to others until such time that certain minimum repayments have been achieved or our non recourse note matures in August 2028. The amount of proceeds payable to others depends 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 cash flows generated from proceeds received from patent enforcement actions and/or technology licenses in 2024, after deduction of contingent payment obligations, will not be sufficient to cover our operating expenses and debt repayment obligations. In the event we do not generate revenues, or other patent-related proceeds, sufficient to cover our operational costs and contingent repayment obligations, we will be required to raise additional working capital through the sale of debt or 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 obligations and other long-term debt repayment obligations. Failure to generate sufficient revenues, raise additional capital through debt or equity financings, and/or reduce operating costs could have a material adverse effect on our ability to meet our short and long-term liquidity needs and achieve our intended long-term business objectives.
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. The net book value of our intangible assets was approximately $1.1 million and $1.4 million as of December 31, 2023 and 2022, respectively. The cost basis for our intangible assets represents capitalized legal costs and agency filing fees for securing intellectual property protection and does not include the costs expended in developing the underlying intellectual property. The cost of our intangible assets is 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 $0.2 million in patent amortization expense recognized in 2023 as our portfolio matures. Management evaluates the recoverability of intangible assets periodically and considers events or circumstances that may warrant revised estimates of useful lives or that may indicate impairment exists. As part of our ongoing patent maintenance program, we may, from time to time, abandon a particular patent if we determine fees to maintain the patent exceed its expected recoverability. For the years ended December 31, 2023 and 2022, we incurred losses of approximately $0.06 million and $0.12 million, respectively, for the write-off of specific patent assets. These losses are included in operating expenses in the accompanying consolidated statements of comprehensive income (loss) included in Item 8.
Contingent Payment Obligations
We have secured and unsecured contingent payment obligations recorded at an aggregate estimated fair value of $37.0 million and $45.8 million as of December 31, 2023 and 2022, 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 11 to our consolidated financial statements included in Item 8 for a discussion of the fair value measurement of our contingent payment obligations.
Our secured contingent payment obligation is payable to Brickell as a result of $23 million in aggregate borrowings under litigation funding arrangements initiated in 2016. As of December 31, 2023, we have repaid Brickell an aggregate of $17.3 million to date under these agreements. The contingent payment obligation to Brickell is recorded at its estimated fair market value of $29.4 million at December 31, 2023, a decrease of $11.3 million or 28% from the estimated fair market value at December 31, 2022. This decrease in fair value is primarily the result of $13.9 million in repayments, along with renegotiation of future repayment arrangements with Brickell in 2023, offset by $5.0 million in new borrowings and continued increases in accrued interest payable to Brickell.
Brickell is entitled to the first $5.8 million in proceeds received by us, net of contingent legal fees, from any patent-related actions. Thereafter, Brickell is entitled to a prorated percentage of net proceeds. The underlying carrying value of the contingent payment obligation is represented by a non recourse note with a face value of $45.5 million, plus accrued interest of approximately $5.5 million as of December 31, 2023. The note matures on August 14, 2028. If our repayments to Brickell are insufficient to repay the face value of the note plus accrued interest by the maturity date, our remaining repayment obligations under the note will be reduced to zero with future payment obligations, if any, being determined under a separate prepaid forward purchase agreement that entitles Brickell to a specified percentage of monetary recoveries resulting from patent-related actions to the extent not already paid to Brickell under the note or previous litigation funding agreements.
In addition, we have incurred unsecured contingent payment obligations in connection with various funding arrangements. These contingent payment obligations are payable from our share of patent-related proceeds after satisfaction of our obligation to Brickell and payment of contingent fees to legal counsel. These unsecured contingent payment obligations are recorded at an aggregate estimated fair value of $7.6 million at December 31, 2023, representing an increase of $2.5 million from the estimated fair market value at December 31, 2022. This increase is primarily the result of changes in the estimated amounts and timing of projected future cash flows due to changes in probabilities and time frames based on the status of various patent infringement actions. The maximum payment obligation for our unsecured contingent payment obligations is $10.8 million at December 31, 2023.
See “Change in Fair Value of Contingent Obligations” included in “Results of Operations” below for a discussion of the changes in the estimated fair values of our secured and unsecured contingent payment obligations.
Note Payable
As of December 31, 2023, we have a $0.5 million unsecured note payable to Sterne, Kessler, Goldstein, & Fox, PLLC (“SKGF”), a related party. The note calls for monthly payments of $12,500 through March 2027 with a final payment of approximately $0.02 million in April 2027. Failure to comply with the payment terms of this note constitutes an event of default which, if uncured, will result in the entire unpaid principal balance of the note and any unpaid, accrued interest to become immediately due and payable. In addition, an event of default results in an increase in the interest rate under the notes to a default rate of 12% per annum. Notes payable are discussed more fully in Note 8 to our consolidated financial statements included in Item 8.
Convertible Notes
As of December 31, 2023, we have $4.9 million in notes that are convertible, at the holders’ option, into shares of our common stock at fixed conversion prices ranging from $0.08 to $0.25 per share. These notes mature at varying dates from June 2024 to January 2028. The majority of the notes bear interest at a stated rate of 8%, payable quarterly. We have the option, subject to certain conditions, to pay the quarterly interest in-kind with shares of our common stock based on market price at the interest payment date. To date, all of the interest payments under these convertible notes have been paid in-kind and we anticipate that future payments of interest will also be paid in-kind. The notes provide for events of default that include failure to pay principal or interest when due, breach of any of the representations made by us, events of liquidation or bankruptcy, and a change in 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 notes. Our convertible notes payable are more fully discussed in Note 9 to our consolidated financial statements included in Item 8.
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, 2023, we had net deferred tax assets of approximately $83.7 million, primarily related to our NOL carryforwards, which were fully offset by a valuation allowance due to the uncertainty related to realization of these assets through future taxable income. In addition, our ability to benefit from our NOL and other tax credit carryforwards could be limited under Section 382 as more fully discussed in “Risk Factors” and in Note 12 to our consolidated financial statements included in Item 8.
Results of Operations for Each of the Years Ended December 31, 2023 and 2022
Revenues and Gross Margins
Licensing revenue was $25.00 million and $0.93 million for the years ended December 31, 2023 and December 31, 2022, respectively. Our licensing revenue is from patent licensing and settlement agreements resulting from patent enforcement actions filed by us. To date, all of our license and settlement agreements have consisted of a one-time, lump sum payment with no recurring future revenue. We recognized revenue from each contract when the parties’ performance obligations were met. Cost of sales related to the licensing revenue consists of amortization expense related to the patents covered under the license agreements. Our licensing revenue is expected to vary based on the market size of the licensee and the specific terms of the license and settlement agreement.
Our licensing proceeds in 2023 were used to pay contingent out-of-pocket expenses and fees incurred by our litigation counsel and to repay a portion of our secured contingent payment obligations. Our licensing proceeds in 2022 were fully used to pay contingent out-of-pocket expenses incurred by our litigation counsel and therefore did not have an impact on our cash flows from operations. The contingent out-of-pocket expenses, which are recognized in the same period as the corresponding revenue, are included in selling, general and administrative expenses.
Although we anticipate additional revenue to result from our licensing and patent enforcement actions, the amount and timing is highly unpredictable and there can be no assurance that we will achieve our anticipated results.
Selling, General, and Administrative Expenses
Selling, general and administrative expenses consist primarily of executive, director, technical support, and finance and administrative personnel costs, including share-based compensation, costs incurred for insurance, shareholder relations and outside legal and professional services, including litigation expenses, and amortization and maintenance expenses related to our patent assets.
Our selling, general and administrative expenses were approximately $14.7 million for the year ended December 31, 2023, as compared to approximately $7.8 million for the year ended December 31, 2022, representing an increase of approximately $7.0 million or 90%. This increase results primarily from a $9.6 million increase in litigation fees and expenses and is partially offset by a decrease in share-based compensation of $2.6 million attributed to nonqualified stock options and restricted stock units becoming fully vested during the year ended December 31, 2022. We recognized approximately $11.1 million and $0.9 million in contingent litigation expenses resulting from patent license and settlement arrangements for the years ended December 31, 2023 and December 31, 2022, respectively. The contingent legal fees and expenses recognized are generally proportionate to the amount of gross proceeds received from our confidential patent license and settlement agreements.
Change in Fair Value of Contingent Payment Obligations
We have elected to measure our secured and unsecured contingent payment obligations at fair value which is based on significant unobservable inputs. We estimated the fair value of our secured contingent payment obligations using a probability-weighted income approach based on the estimated present value of projected future cash outflows using a risk-adjusted discount rate. Increases or decreases in the significant unobservable inputs could result in significant increases or decreases in fair value. Generally, changes in fair value are a result of changes in estimated amounts and timing of projected future cash flows due to increases in funded amounts, passage of time, and changes in the probabilities based on the status of the funded actions.
For the year ended December 31, 2023, we recorded a net increase in the aggregate fair value of our secured and unsecured contingent payment obligations of approximately $0.1 million. The majority of the change in fair value is attributable to changes in the estimated amounts and timing of projected future cash flows due to changes in probabilities and time frames based on the status of various patent infringement actions, as well as the impact of revised funding agreements with Brickell.
Critical Accounting Policies
We believe that the following are critical accounting policies and estimates that significantly impact the preparation of our consolidated financial statements:
Contingent Payment Obligations
We have accounted for our secured and unsecured contingent payment obligations as long-term debt. Our repayment obligations are contingent upon the receipt of proceeds from patent enforcement or other patent monetization actions. We have elected to measure our contingent payment obligations at their estimated fair values based on the variable and contingent nature of the repayment provisions. We have determined that the fair value of our secured and unsecured contingent payment obligations falls within Level 3 in the fair value hierarchy, which involves significant estimates and assumptions including projected future patent-related proceeds and the risk-adjusted rate for discounting future cash flows. Actual results could differ from the estimates made. Changes in fair value, including the component related to imputed interest, are included in the consolidated statements of comprehensive income (loss) under the heading “Change in fair value of contingent payment obligations.” Refer to Note 11 to our consolidated financial statements included in Item 8 for a discussion of the significant estimates and assumptions used in estimating the fair value of our contingent payment obligations.
Accounting for Share-Based Compensation
We calculate the fair value of share-based equity awards, including restricted stock, stock options and restricted stock units (“RSUs”), on the date of grant and recognize the calculated fair value as compensation expense over the requisite service periods of the related awards. The fair value of stock option awards is determined using the Black-Scholes option valuation model that requires the use of highly subjective assumptions and estimates including how long the holder will retain their stock options before exercising them and the volatility of our common stock price over the expected life of the equity award. Changes in these subjective assumptions can materially affect the estimate of fair value of share-based compensation and consequently, the related amount recognized as expense in the consolidated statements of comprehensive income (loss).
New Accounting Pronouncements
There have been no new accounting pronouncements that are expected to have a material impact on our financial position, results of operations or cash flows when they become effective.
Off-Balance Sheet Transactions
As of December 31, 2023, we had outstanding warrants to purchase 10.3 million shares of our common stock. The estimated grant date fair value of these warrants of approximately $3.5 million is included in shareholders’ deficit in our consolidated balance sheet for the year ended December 31, 2023. The outstanding warrants have an average exercise price of $0.75 per share and a weighted average remaining life of approximately 1.5 years.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
Not applicable.
Item 8. Financial Statements and Supplementary Data.
| Index to Consolidated Financial Statements | |
| Page | |
| REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM (for the years ended December 31, 2023 and 2022) (PCAOB ID: | |
| FINANCIAL STATEMENTS: | |
| Consolidated Statements of Shareholders’ Deficit - for the years ended December 31, 2023 and 2022 | |
| Consolidated Statements of Cash Flows - for the years ended December 31, 2023 and 2022 | |
| Notes to Consolidated Financial Statements - December 31, 2023 and 2022 | |
| SUPPLEMENTARY DATA: | |
| Not applicable | |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of Directors and Shareholders
ParkerVision, Inc.
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheets of ParkerVision, Inc. (the “Company”) and its subsidiary as of December 31, 2023 and 2022, and the related consolidated statements of comprehensive income (loss), shareholders’ deficit and cash flows for each of the years in the two-year period ended December 31, 2023, 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 as of December 31, 2023 and 2022, and the results of their operations and their cash flows for each of the years in the two-year period ended December 31, 2023 in conformity with accounting principles generally accepted in the United States of America.
Substantial Doubt About the Entity's Ability to Continue as a Going Concern
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the consolidated financial statements, the Company's current resources are not sufficient to meet their liquidity needs for the next twelve months, the Company has historically suffered recurring losses from operations, and has a net capital deficiency that raise substantial doubt about its ability to continue as a going concern. Management’s evaluation of the events and conditions and management's plans regarding those matters are also described in Note 2. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. Our opinion is not modified with respect to this matter.
Basis for Opinion
These 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 audits. 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 U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As a part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the 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 audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
Estimation of Fair Value of Contingent Payment Obligations
As disclosed in Note 1 of the Company’s consolidated financial statements, the Company accounts for their secured and unsecured contingent payment obligations as long-term debt. Their payment obligations are contingent upon the receipt of proceeds from patent enforcement and/or patent monetization actions. The Company has elected to measure their contingent payment obligations at their estimated fair values. The Company recorded the fair value of their contingent payment obligations at approximately $37,020,000 as of December 31, 2023.
Auditing management’s estimate of the fair value of their contingent payment obligations involved subjective evaluation and a high degree of auditor judgement due to significant assumptions involved in estimating the receipt of proceeds from patent enforcement and/or patent monetization actions.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. We obtained an understanding and evaluated the design of internal controls that address the risks of material misstatement relating to recording the contingent payment obligations at fair value. We tested the accuracy and completeness of the underlying data used in calculating the fair value. We evaluated management’s ability to accurately estimate the assumptions used to develop the fair value of the contingent payment obligations. We also involved an independent legal firm to assist in evaluating the reasonableness of the assumptions of future litigation outcomes used by the Company in estimating the receipt of proceeds from patent enforcement and/or patent monetization actions.
/s/
We have served as the Company’s auditor since 2019.
March 21, 2024
CONSOLIDATED BALANCE SHEETS
December 31, 2023 and 2022
(in thousands)
| 2023 | 2022 | |||||||
| CURRENT ASSETS: | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Prepaid expenses | ||||||||
| Other current assets | ||||||||
| Total current assets | ||||||||
| Intangible assets, net | ||||||||
| Other assets, net | ||||||||
| Total assets | $ | $ | ||||||
| CURRENT LIABILITIES: | ||||||||
| Accounts payable | $ | $ | ||||||
| Accrued expenses: | ||||||||
| Salaries and wages | ||||||||
| Professional fees | ||||||||
| Other accrued expenses | ||||||||
| Convertible notes, current portion | ||||||||
| Related party note payable, current portion | ||||||||
| Total current liabilities | ||||||||
| LONG-TERM LIABILITIES: | ||||||||
| Secured contingent payment obligation | ||||||||
| Unsecured contingent payment obligations | ||||||||
| Convertible notes, net of current portion | ||||||||
| Related party note payable, net of current portion | ||||||||
| Total long-term liabilities | ||||||||
| Total liabilities | ||||||||
| COMMITMENTS AND CONTINGENCIES | ||||||||
| SHAREHOLDERS' DEFICIT: | ||||||||
| Common stock, $ par value, shares authorized, and issued and outstanding at December 31, 2023 and 2022, respectively | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total shareholders' deficit | ( | ) | ( | ) | ||||
| Total liabilities and shareholders' deficit | $ | $ | ||||||
The accompanying notes are an integral part of these consolidated financial statements.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
FOR THE YEARS ENDED December 31, 2023 and 2022
(in thousands, except per share amounts)
| 2023 |
2022 |
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| Licensing revenue |
$ | $ | ||||||
| Cost of sales |
( |
) | ( |
) | ||||
| Gross margin |
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| Selling, general, and administrative expenses |
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| Total operating expenses |
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| Interest and other income |
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| Interest and other expense |
( |
) | ( |
) | ||||
| Change in fair value of contingent payment obligations |
( |
) | ( |
) | ||||
| Total interest and other |
( |
) | ( |
) | ||||
| Net income (loss) before income tax |
( |
) | ||||||
| Provision for income taxes |
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| Net income (loss) |
( |
) | ||||||
| Other comprehensive income, net of tax |
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| Comprehensive income (loss) |
$ | $ | ( |
) | ||||
| Earnings (loss) per common share |
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| Basic |
$ | $ | ( |
) | ||||
| Diluted |
$ | $ | ( |
) | ||||
| Weighted average common shares outstanding |
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| Basic |
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| Diluted |
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The accompanying notes are an integral part of these consolidated financial statements.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ DEFICIT
FOR THE YEARS ENDED December 31, 2023 and 2022
(in thousands)
| Common Stock, Par Value |
Additional Paid-in Capital |
Accumulated Deficit |
Total Shareholders' Deficit |
|||||||||||||
| Balance as of December 31, 2021 |
$ | $ | $ | ( |
) | $ | ( |
) | ||||||||
| Issuance of common stock and warrants in public and private offerings, net of issuance costs |
||||||||||||||||
| Issuance of common stock upon exercise of options and warrants |
||||||||||||||||
| Issuance of common stock and warrants for services |
||||||||||||||||
| Issuance of common stock upon conversion and payment of interest in kind on convertible debt |
||||||||||||||||
| Share-based compensation, net of shares withheld for taxes |
||||||||||||||||
| Net loss for the year |
( |
) | ( |
) | ||||||||||||
| Balance as of December 31, 2022 |
( |
) | ( |
) | ||||||||||||
| Issuance of common stock and warrants in public and private offerings, net of issuance costs |
||||||||||||||||
| Issuance of common stock upon exercise of options and warrants |
||||||||||||||||
| Issuance of common stock, warrants, and options for services |
||||||||||||||||
| Issuance of common stock upon conversion and payment of interest in kind on convertible debt |
||||||||||||||||
| Share-based compensation, net of shares withheld for taxes |
||||||||||||||||
| Net income for the year |
||||||||||||||||
| Balance as of December 31, 2023 |
$ | $ | $ | ( |
) | $ | ( |
) | ||||||||
The accompanying notes are an integral part of these consolidated financial statements.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED December 31, 2023 and 2022
(in thousands)
| 2023 |
2022 |
|||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: |
||||||||
| Net income (loss) |
$ | $ | ( |
) | ||||
| Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: |
||||||||
| Depreciation and amortization |
||||||||
| Share-based compensation |
||||||||
| Change in fair value of contingent payment obligations |
||||||||
| Loss on disposal/impairment of equipment and intangible assets |
||||||||
| Paid in kind interest expense |
||||||||
| Changes in operating assets and liabilities: |
||||||||
| Prepaid expenses and other assets |
||||||||
| Accounts payable and accrued expenses |
( |
) | ( |
) | ||||
| Total adjustments |
||||||||
| Net cash provided by (used in) operating activities |
( |
) | ||||||
| CASH FLOWS FROM INVESTING ACTIVITIES: |
||||||||
| Purchases of property and equipment |
( |
) | ( |
) | ||||
| Net cash used in investing activities |
( |
) | ( |
) | ||||
| CASH FLOWS FROM FINANCING ACTIVITIES: |
||||||||
| Net proceeds from issuance of common stock in private offerings |
||||||||
| Net proceeds from exercise of options and warrants |
||||||||
| Net proceeds from debt financings |
||||||||
| Proceeds from contingent payment obligation |
||||||||
| Repayment of contingent payment obligation |
( |
) | ||||||
| Principal payments on long-term debt |
( |
) | ( |
) | ||||
| Net cash (used in) provided by financing activities |
( |
) | ||||||
| NET CHANGE IN CASH AND CASH EQUIVALENTS |
( |
) | ||||||
| CASH AND CASH EQUIVALENTS, beginning of year |
||||||||
| CASH AND CASH EQUIVALENTS, end of year |
$ | $ | ||||||
| SUPPLEMENTAL CASH FLOW INFORMATION: |
||||||||
| Cash paid for interest |
$ | $ | ||||||
| Cash paid for income taxes |
$ | $ | ||||||
The accompanying notes are an integral part of these consolidated financial statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2023 and 2022
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 technologies and products. 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 based on those technologies, and we license our technologies to others for use in wireless communication products. We have expended significant financial and other resources to research and develop our RF technologies and to obtain patent protection for those technologies in the 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 licensing and infringement litigation efforts. We currently have patent enforcement actions ongoing in various U.S. district courts against mobile handset, smart television and other WiFi product providers, as well as semiconductor 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.
Basis of Presentation
Our consolidated financial statements are prepared in accordance with generally accepted accounting principles in the U.S. (“GAAP”). Certain reclassifications have been made to prior period amounts to conform to the current period presentation. The consolidated financial statements include the accounts of ParkerVision, Inc. and our wholly-owned German subsidiary, ParkerVision GmbH, after elimination of all intercompany transactions and accounts. As of December 31, 2023, we are in the process of liquidating ParkerVision GmbH which will have no impact on the consolidated financial statements.
Use of Estimates in the Preparation of Financial Statements
The preparation of financial statements in conformity with 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 contingent payment 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.
Cash and 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.
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 to years. Management evaluates the recoverability of intangible assets periodically and considers events or circumstances that may warrant revised estimates of useful lives or that may indicate impairment exists. As part of our ongoing patent maintenance program, we will, from time to time, abandon a particular patent if we determine fees to maintain the patent exceed its expected recoverability. The cost and accumulated amortization of abandoned intangible assets are removed from their respective accounts, and any resulting net loss is recognized in selling, general and administrative expenses in the accompanying consolidated statements of comprehensive income (loss).
Contingent Payment Obligations
We have accounted for our secured and unsecured contingent payment 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 payment obligations are contingent upon the receipt of proceeds from patent enforcement and/or patent monetization actions. We have elected to measure our contingent payment obligations at their estimated fair values in accordance with ASC 825, “Financial Instruments” based on the variable and contingent nature of the repayment provisions. We have determined that the fair value of our secured and unsecured contingent payment obligations falls within Level 3 in the fair value hierarchy, which involves significant estimates, and assumptions including projected future patent-related proceeds and the risk-adjusted rate for discounting future cash flows (see Note 11). Actual results could differ from the estimates made. Changes in fair value, including the component related to imputed interest, are included in the accompanying consolidated statements of comprehensive income (loss) under the heading “Change in fair value of contingent payment obligations.”
Leases
We account for finance and operating leases in accordance with ASC 842, “Leases” which requires the recognition of lease right-of-use assets and lease liabilities on our consolidated balance sheets for finance and operating leases with initial lease terms of more than 12 months. No new finance or operating leases commenced during the years ended December 31, 2023 or 2022. The impacts of leasing arrangements during the years ended December 31, 2023 and 2022 were not considered material.
Revenue Recognition
We 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 revenue recognition model provides a five-step analysis in determining when and how revenue is recognized. These steps include (1) identifying the contract with the customer, (2) identifying the performance obligations, (3) determining the transaction price, (4) allocating the transaction price to the performance obligations, and (5) recognizing revenue as the entity satisfies the performance obligation(s).
Our revenue is derived from patent licensing and settlement agreements. We have an active monitoring and enforcement program with respect to our intellectual property rights that includes seeking appropriate compensation from third parties that utilize or have utilized our intellectual property without a license. As a result, we may receive payments as part of a settlement or in the form of court-awarded damages for a patent infringement dispute. The timing and amount of revenue recognized from each licensee depend upon a variety of factors, including the specific terms of each agreement and the nature of the deliverables and obligations. Such agreements are often complex and may include multiple performance obligations. These agreements can include performance obligations related to the settlement of past patent infringement liabilities, royalties on future covered products sold by licensees, access to a portfolio of technology as it exists at a point in time, and/or promises to provide technology updates to the portfolio during the term of the license.
Refer to Note 3 for additional disclosures related to our revenue.
Cost of Sales
Cost of sales includes amortization of intangible assets directly linked with revenue generating licensing activities. Amortization expense for intangible assets that are not directly related to revenue generating licensing activities are included in selling, general, and administrative expenses in our consolidated statements of comprehensive income (loss). As a result of the confidential patent license and settlement agreement reached in February 2023, all of our patents are now directly linked with revenue generating licensing activities and, therefore, amortization expense for all intangible assets is now recorded to cost of sales.
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 share-based equity awards on the date of grant and recognize the calculated fair value as compensation expense over the requisite service periods of the related awards. We estimate the fair value of stock option awards using the Black-Scholes option valuation model. This valuation model requires the use of highly subjective assumptions and estimates including how long employees will retain their stock options before exercising them and the volatility of our common stock price over the expected life of the equity award. Such estimates, and the basis for our conclusions regarding such estimates, are outlined in detail in Note 15. Estimates of fair value are not intended to predict actual future events or the value ultimately realized by persons who receive equity awards. We account for forfeitures of share-based awards as they occur.
Income Taxes
The provision for income taxes is based on income (loss) before taxes as reported in the accompanying consolidated statements of comprehensive income (loss). Deferred tax assets and liabilities are recognized for the expected future tax consequences of events that have been included in the financial statements or tax returns. Deferred tax assets and liabilities are determined based on differences between the financial statement carrying amounts and the tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Valuation allowances are established to reduce deferred tax assets when, based on available objective evidence, it is more likely than not that the benefit of such assets will not be realized. Our deferred tax assets exclude unrecognized tax benefits which do not meet a more-likely-than-not threshold for financial statement recognition for tax positions taken or expected to be taken in a tax return.
2. LIQUIDITY AND GOING CONCERN
The accompanying consolidated financial statements as of and for the year ended December 31, 2023 were prepared assuming we will continue as a going concern, which contemplates that we will continue in operation and will be able to realize our assets and settle our liabilities and commitments in the 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.
With the exception of the year ended December 31, 2023,we have incurred significant losses from operations and negative cash flows in every year since inception, largely as a result of our significant investments in developing advanced technologies and protecting our intellectual property. We have utilized the proceeds from sales of debt and equity securities and contingent funding arrangements with third parties to fund our operations, including the cost of litigation to enforce our intellectual property rights. At December 31, 2023, we had cash and cash equivalents of approximately $
For the year ended December 31, 2023, we recognized net income of approximately $
Despite the net income and cash flows generated during the year ended December 31, 2023, a significant amount of future proceeds that we may receive from our patent enforcement and licensing programs will first be utilized to repay borrowings, legal fees, and litigation expenses under our contingent funding arrangements. In addition, we have approximately $
Our business plan is currently focused solely on our patent enforcement and technology licensing objectives. The timing and amount of proceeds from our patent enforcement actions are difficult to predict and there can be no assurance we will receive any proceeds from these enforcement actions. Refer to Note 13 for a complete discussion of our patent enforcement proceedings.
Significant portions of our litigation costs to date have been funded by contingent payment arrangements with legal counsel. Fee discounts offered by legal counsel in exchange for contingent payments upon successful outcome in our litigation are not recognized in expense until such time that the related proceeds on which the contingent fees are payable are considered probable. Contingent fees vary based on each firm’s specific fee agreement. We currently have contingent fee arrangements in place for all of our active cases. In addition to our contingent fee agreements with legal counsel, we have secured and unsecured contingent payment obligations that have priority payments due from patent-related proceeds.
Our current capital resources are not sufficient to meet our liquidity needs for the next twelve months and we may be required to seek additional capital. Our ability to meet our liquidity needs for the next twelve months is dependent upon (i) our ability to successfully negotiate licensing agreements and/or settlements relating to the use of our technologies by others in excess of our contingent payment obligations, (ii) our ability to control operating costs, (iii) our ability to successfully negotiate extensions to the maturity date for certain convertible notes, and/or (iv) our ability to obtain additional debt or equity financing. We expect that proceeds received by us from patent enforcement actions and technology licenses over the next twelve months may not alone be sufficient to cover our working capital requirements.
We expect to continue to invest in the support of our patent licensing and enforcement program. The long-term continuation of our business plan is dependent upon the generation of sufficient cash flows from our technologies and or products to offset expenses and debt obligations. In the event that we do not generate sufficient cash flows, we will be required to obtain additional funding through public or private debt or equity financing or contingent fee arrangements and/or reduce operating costs. Failure to generate sufficient cash flows, raise additional capital through debt or equity financings or contingent fee arrangements, and/or reduce operating costs could have a material adverse effect on our ability to meet our short and long-term liquidity needs and achieve our intended long-term business objectives.
3. REVENUE
During the years ended December 31, 2023 and 2022, we recognized $
4. EARNINGS PER SHARE
Basic earnings per common share is determined based on the weighted-average number of common shares outstanding during each period. Diluted loss per common share is the same as basic loss per common share for the year ended December 31, 2022, as all common share equivalents are excluded from the calculation, as their effect is anti-dilutive. The dilutive effect of outstanding options and warrants is calculated using the treasury stock method. The dilutive effect of shares underlying convertible notes was calculated using the if-converted method. The following table shows the computation of basic and diluted earnings (loss) per share for the years ended December 31, 2023 and 2022 (net income (loss) and shares in thousands):
| Year Ended December 31, | ||||||||
| 2023 | 2022 | |||||||
| Numerator: | ||||||||
| Net income (loss) | $ | $ | ( | ) | ||||
| Effect of dilutive securities | ||||||||
| Net income (loss) adjusted for dilutive effect | ( | ) | ||||||
| Denominator: | ||||||||
| Weighted-average basic shares outstanding | ||||||||
| Effect of dilutive securities | ||||||||
| Weighted-average diluted shares | ||||||||
| Basic earnings (loss) per share | $ | $ | ( | ) | ||||
| Diluted earnings (loss) per share | $ | $ | ( | ) | ||||
Diluted earnings per common share for the years ended December 31, 2023 and 2022 excludes options, warrants, and shares underlying convertible notes that are anti-dilutive. The anti-dilutive common share equivalents at December 31, 2023 and 2022 were as follows (in thousands):
| 2023 | 2022 | |||||||
| Options outstanding | | | ||||||
| Warrants outstanding | ||||||||
| Shares underlying convertible notes | ||||||||
5. PREPAID EXPENSES
Prepaid expenses consisted of the following at December 31, 2023 and 2022 (in thousands):
| 2023 | 2022 | |||||||
| Prepaid services | $ | $ | ||||||
| Prepaid insurance | ||||||||
| Prepaid licenses, software tools and support | ||||||||
| Other prepaid expenses | ||||||||
| $ | $ | |||||||
Prepaid services at December 31, 2022 include approximately $
6. INTANGIBLE ASSETS
Intangible assets consisted of the following at December 31, 2023 and 2022 (in thousands):
| 2023 | 2022 | |||||||
| Patents and copyrights | $ | $ | ||||||
| Less accumulated amortization | ( | ) | ( | ) | ||||
| $ | $ | |||||||
Amortization expense for the years ended December 31, 2023 and 2022 was approximately $
Future estimated amortization expense for intangible assets that have remaining unamortized amounts as of December 31, 2023 is as follows (in thousands):
| 2024 | $ | |||
| 2025 | ||||
| 2026 | ||||
| 2027 | ||||
| 2028 | ||||
| 2029 and thereafter | ||||
| Total | $ |
7. ACCRUED LIABILITIES
Other accrued expenses consisted of the following at December 31, 2023 and 2022 (in thousands):
| 2023 | 2022 | |||||||
| Advances | $ | $ | ||||||
| Accrued interest | ||||||||
| Other accrued expenses | ||||||||
| $ | $ | |||||||
Advances include amounts received from litigation counsel as advanced reimbursement of out-of-pocket expenses expected to be incurred by us.
8. NOTES PAYABLE
Note Payable to a Related Party
We have an unsecured promissory note payable of $
At December 31, 2023, the aggregate maturities of our notes payable are as follows (in thousands):
| 2024 | $ | |||
| 2025 | ||||
| 2026 | ||||
| 2027 | ||||
| Total | $ |
The estimated fair value of our notes payable at December 31, 2023 is approximately $
9. CONVERTIBLE NOTES
Our convertible notes represent promissory notes that are convertible, at the holders’ option, into shares of our common stock at fixed conversion prices. Interest payments are made on a quarterly basis and are payable, at our option and subject to certain equity conditions, in either cash, shares of our common stock, or a combination thereof. The number of shares issued for interest is determined by dividing the interest payment amount by the closing price of our common stock on the trading day immediately prior to the scheduled interest payment date. To date, all interest payments on the convertible notes have been made in shares of our common stock. We have recognized the convertible notes as debt in our consolidated financial statements.
Convertible notes payable at December 31, 2023 and 2022, consist of the following (in thousands):
| Fixed | |||||||||||||||||
| Conversion | Interest | December 31, | |||||||||||||||
| Description | Rate | Rate | Maturity Date | 2023 | 2022 | ||||||||||||
| Convertible notes dated September 10, 2018 | $ | % | September 7, 2023 | $ | $ | ||||||||||||
| Convertible notes dated September 18, 2018 | $ | 1 | % | March 18, 2026 1 | |||||||||||||
| Convertible notes dated February/March 2019 | $ | % | February 28, 2026 to March 13, 2026 2 | ||||||||||||||
| Convertible notes dated June/July 2019 | $ | % | June 7, 2024 to July 15, 2024 | ||||||||||||||
| Convertible notes dated July 18, 2019 | $ | % | July 18, 2024 | ||||||||||||||
| Convertible notes dated September 13, 2019 | $ | % | September 13, 2024 | ||||||||||||||
| Convertible notes dated January 8, 2020 | $ | % | January 8, 2025 3 | ||||||||||||||
| Convertible notes dated May-August 2022 | $ | % | May 10, 2027 to August 3, 2027 | ||||||||||||||
| Convertible note dated January 11, 2023 | $ | % | January 11, 2028 3 | ||||||||||||||
| Convertible notes dated January 13, 2023 | $ | % | January 13, 2028 | ||||||||||||||
| Convertible note dated September 15, 2023 | $ | % | March 15, 2026 | ||||||||||||||
| Total principal balance | |||||||||||||||||
| Less current portion | |||||||||||||||||
| $ | $ | ||||||||||||||||
1 These notes were amended on September 15, 2023, reducing the conversion rate from $
2 These notes were amended on September 15, 2023, extending the maturity date from February 28, 2024 through March 13, 2024 to February 28, 2026 through March 13, 2026. The amendments are accounted for on a prospective basis in accordance with ASC 470-60.
3 The maturity date may be extended by one-year increments for up to an additional ten years at the holder’s option at a reduced interest rate of
At December 31, 2023, we estimate our convertible notes have an aggregate fair value of approximately $
10. CONTINGENT PAYMENT OBLIGATIONS
Secured Contingent Payment Obligation
The following table provides a reconciliation of our secured contingent payment obligation measured at estimated fair market value for the years ended December 31, 2023 and 2022, respectively (in thousands):
| 2023 | 2022 | |||||||
| Secured contingent payment obligation, beginning of year | $ | $ | ||||||
| Proceeds from contingent payment obligation | ||||||||
| Repayment | ( | ) | ||||||
| Change in fair value | ( | ) | ||||||
| Secured contingent payment obligation, end of year | $ | $ | ||||||
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. On August 14, 2023, the contingent funding agreement with Brickell was replaced with a secured, non-recourse note (the "Note") and a prepaid forward purchase agreement (the "PPFPA"). The Note has a face value of $
To date, we have received aggregate proceeds of $
Brickell holds a senior security interest in the majority of our assets until such time as the Note, including accrued interest thereon, is paid in full. The security interest is enforceable by Brickell in the event that we are in default under the agreement which would occur if (i) we fail, after notice, to pay proceeds to Brickell, (ii) we become insolvent or insolvency proceedings are commenced (and not subsequently discharged) with respect to us, (iii) our creditors commence actions against us (which are not subsequently discharged) that affect our material assets, (iv) we, without Brickell’s consent, incur indebtedness other than immaterial ordinary course indebtedness, or (v) there is an uncured non-compliance of our obligations or misrepresentations under the agreement. As of December 31, 2023, we are in compliance with our obligations under this agreement.
We have elected to measure our secured contingent payment obligation at its estimated fair value based on probability-weighted estimated cash outflows, discounted back to present value using a discount rate determined in accordance with accepted valuation methods (see Note 11). The secured contingent payment obligation is remeasured to fair value at each reporting period with changes recorded in the consolidated statements of comprehensive income (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, 2023 and 2022, respectively (in thousands):
| 2023 | 2022 | |||||||
| Unsecured contingent payment obligations, beginning of year | $ | $ | ||||||
| Change in fair value | ( | ) | ||||||
| Unsecured contingent payment obligations, end of year | $ | $ | ||||||
Our unsecured contingent payment obligations represent amounts payable to others from future patent-related proceeds including (i) a termination fee due to a litigation funder (“Termination Fee”) and (ii) contingent payment rights (“CPRs”) issued to accredited investors primarily in connection with equity financings. We have elected to measure these unsecured contingent payment obligations at their estimated fair value based on probability-weighted estimated cash outflows, discounted back to present value using a discount rate determined in accordance with accepted valuation methods. The unsecured contingent payment obligations will be remeasured to fair value at each reporting period with changes recorded in the consolidated statements of comprehensive income (loss) until the contingency is resolved (see Note 11).
The Termination Fee is a result of $
The CPRs represent the estimated fair value of rights provided to accredited investors who purchased shares of our common stock in 2020 and 2021 and the fair value of a right issued to a third-party in connection with a service agreement during the year ended December 31, 2020.
11. FAIR VALUE MEASUREMENTS
ASC 820, “Fair Value Measurements” establishes a fair value hierarchy that prioritizes the inputs to valuation methods used to measure fair value. The three levels of the fair value hierarchy are as follows:
| ● | Level 1: Quoted prices for identical assets or liabilities in active markets which we can access |
| ● | Level 2: Observable inputs other than those described in Level 1 |
| ● | Level 3: Unobservable inputs |
The following table summarizes financial assets and financial liabilities carried at fair value and measured on a recurring basis as of December 31, 2023 and 2022, segregated by classification within the fair value hierarchy (in thousands):
| Fair Value Measurements | ||||||||||||||||
| Total | Quoted Prices in Active Markets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | |||||||||||||
| December 31, 2023: | ||||||||||||||||
| Liabilities: | ||||||||||||||||
| Secured contingent payment obligation | $ | $ | $ | $ | ||||||||||||
| Unsecured contingent payment obligations | ||||||||||||||||
| December 31, 2022: | ||||||||||||||||
| Liabilities: | ||||||||||||||||
| Secured contingent payment obligation | ||||||||||||||||
| Unsecured contingent payment obligations | ||||||||||||||||
For the years ended December 31, 2023 and 2022, respectively, we had no transfers of assets or liabilities between the levels of the hierarchy.
The fair values of our secured and unsecured contingent payment obligations were estimated using a probability-weighted income approach based on various cash flow scenarios as to the outcome of patent-related actions both in terms of timing and amount, discounted to present value using a risk-adjusted rate. We used a risk-adjusted discount rate for the secured and unsecured contingent payment obligations of
The following table provides quantitative information about the significant unobservable inputs used in the measurement of fair value for both the secured and unsecured contingent payment obligations at December 31, 2023, including the lowest and highest undiscounted payout scenarios as well as a weighted average payout scenario based on relative undiscounted fair value of each cash flow scenario.
| Secured Contingent Payment Obligation | Unsecured Contingent Payment Obligations | |||||||||||||||||||||||
| Unobservable Inputs | Low | Weighted Average | High | Low | Weighted Average | High | ||||||||||||||||||
| Estimated undiscounted cash outflows (in millions) | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Duration (in years) | ||||||||||||||||||||||||
| Estimated probabilities | % | % | % | % | % | % | ||||||||||||||||||
We evaluate the estimates and assumptions used in determining the fair value of our contingent payment obligations each reporting period and make any adjustments prospectively based on those evaluations. Changes in any of these Level 3 inputs could result in a significantly higher or lower fair value measurement.
12. INCOME TAXES AND TAX STATUS
Our net income (loss) before income tax for the years ended December 31, 2023 and 2022 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 have been included in our operating results.
A reconciliation between the provision for income taxes and the expected tax benefit using the federal statutory rate of
| 2023 | 2022 | |||||||
| Tax expense (benefit) at statutory rate | $ | $ | ( | ) | ||||
| State tax expense (benefit) | ( | ) | ||||||
| (Decrease) increase in valuation allowance | ( | ) | ||||||
| Other | ||||||||
| $ | - | $ | - | |||||
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, 2023 and 2022 (in thousands):
| 2023 | 2022 | |||||||
| Gross deferred tax assets: | ||||||||
| Net operating loss carry-forward | $ | $ | ||||||
| Research and development credit carry-forward | ||||||||
| Stock compensation | ||||||||
| Patents and other | ||||||||
| Contingent payment obligations | ||||||||
| Fixed assets | ( | ) | ( | ) | ||||
| Charitable contributions | ||||||||
| Lease liabilities | ||||||||
| Less valuation allowance | ( | ) | ( | ) | ||||
| Net deferred tax asset | $ | $ | ||||||
At December 31, 2023, we had cumulative NOL carry-forwards for income tax purposes of $
Our ability to benefit from the NOL and 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, 2023 which would result in limitations of our NOL, capital loss or R&D credit carry-forwards under Section 382.
Uncertain Tax Positions
We file income tax returns in the U.S. federal jurisdiction, various state 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 2004 through 2023 tax years. The following table provides a reconciliation of our unrecognized tax benefits due to uncertain tax positions for the years ended December 31, 2023 and 2022, respectively (in thousands):
| 2023 | 2022 | |||||||
| Unrecognized tax benefits – beginning of year | $ | $ | ||||||
| Reduction as a result of lapse of statute of limitations | ( | ) | ||||||
| Unrecognized tax benefits – end of year | $ | $ | ||||||
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, 2023 and 2022, we did not incur any income tax-related interest income, expense or penalties.
13. COMMITMENTS AND CONTINGENCIES
Legal Proceedings
From time to time, we are subject to legal proceedings and claims which arise in the ordinary course of our business. These proceedings include patent enforcement actions initiated by us against others for the infringement of our technologies, as well as proceedings brought by others against us at the Patent Trial and Appeal Board of the U.S. Patent and Trademark Office (“PTAB”) in an attempt to invalidate certain of our patent claims.
The majority of our litigation, including our PTAB proceedings, is being paid for through contingency fee arrangements with our litigation counsel as well as third-party litigation financing. In general, litigation counsel is entitled to recoup on a priority basis, from litigation proceeds, any out-of-pocket expenses incurred. Following reimbursement of out-of-pocket expenses, litigation counsel is generally entitled to a percentage of remaining proceeds based on the terms of the specific arrangement between us, counsel and our third-party litigation funder.
ParkerVision v. Qualcomm (Middle District of Florida-Orlando Division) - Appealed to U.S. Court of Appeals for the Federal Circuit
In March 2022, the district court ruled on a number of pre-trial motions in our patent infringement case against Qualcomm. The court granted Qualcomm motions to strike and exclude opinions regarding the alleged infringement and validity issues, essentially precluding infringement and validity opinions by both of our experts at trial. The court also issued an order granting Qualcomm’s motion for summary judgment ruling that Qualcomm did not infringe the remaining three patents in the case. In April 2022, we filed a notice of appeal to the United States Court of Appeals for the Federal Circuit. A hearing was held on our appellate action on November 6, 2023, and we are currently awaiting a ruling from the Federal Circuit.
This patent infringement case was originally filed in the Middle District of Florida in May 2014. The case was stayed in February 2016 pending decisions in other cases, including the appeal of a PTAB proceeding with regard to U.S. patent 6,091,940 (“the ‘940 Patent”) asserted in this case. In March 2017, the PTAB ruled in our favor on
In April 2020, the court issued its claim construction order in which the court adopted our proposed construction for
In March 2021, the court further delayed the trial date citing backlog due to the pandemic, among other factors. A new trial date was not set and the court indicated the case was unlikely to be tried before November or December 2021. Fact and expert discovery was completed, expert reports were submitted, and summary judgment and Daubert briefings were submitted by the parties. Joint pre-trial statements were submitted in May 2021. In March 2021, the court granted Qualcomm’s motion to strike certain of our 2020 infringement contentions. As a result of this ruling, in July 2021, we filed a joint motion for entry of a judgment of non-infringement of our Patent No. 7,865,177 (“the ‘177 Patent”), subject to appeal.
In January 2022, the court held a hearing to allow the parties to present their respective positions on three outstanding motions. In March 2022, the district court rulings in favor of Qualcomm closed the district court case, subject to our appeal. As a result of the court’s summary judgment motion in favor of Qualcomm, Qualcomm has the right to petition the court for its fees and costs. The court has granted a Qualcomm motion to delay such a petition until 30 days following the appellate court’s decision. We are represented in this case on a full contingency fee basis.
ParkerVision v. Apple and Qualcomm (Middle District of Florida-Jacksonville Division)
In December 2015, we filed a patent infringement complaint in the Middle District of Florida against Apple Inc. (“Apple”), LG Electronics, Inc., LG Electronics U.S.A., Inc., and LG Electronics MobileComm U.S.A., Inc. (collectively “LG”), Samsung Electronics Co. Ltd., Samsung Electronics America, Inc., Samsung Telecommunications America LLC, and Samsung Semiconductor, Inc. (collectively “Samsung”), and Qualcomm alleging infringement of
ParkerVision v. LG (District of New Jersey)
In July 2017, we filed a patent infringement complaint in the District of New Jersey against LG for the alleged infringement of
ParkerVision v. Intel (Western District of Texas)
We filed two patent infringement complaints in the Western District of Texas against Intel Corporation (“Intel”) in 2020, alleging infringement of approximately
ParkerVision v. TCL (Western District of Texas)
We filed two patent infringement actions in the Western District of Texas in 2020 and 2021 against TCL Industries Holdings Co., Ltd, a Chinese company, TCL Electronics Holdings Ltd., Shenzhen TCL New Technology Co., Ltd, TCL King Electrical Appliances (Huizhou) Co., Ltd., TCL Moka Int’l Ltd. and TCL Moka Manufacturing S.A. DE C.V. (collectively “TCL”) alleging infringement of approximately
ParkerVision v. LGE (Western District of Texas)
We filed a patent infringement action in the Western District of Texas against LG Electronics, a South Korean company ("LGE") in 2021, alleging infringement of
ParkerVision v. Realtek (Western District of Texas)
We filed two patent infringement actions in the Western District of Texas against Realtek Semiconductor Corp. ("Realtek"), the first in 2022 and a second in 2023, alleging infringement of an aggregate of
ParkerVision v. MediaTek (Western District of Texas)
We filed three patent infringement actions in the Western District of Texas against MediaTek Inc. and MediaTek USA Inc. (collectively, "MediaTek"), the first in 2022 and two additional cases in 2023, alleging infringement of an aggregate of
ParkerVision v. Texas Instruments (Western District of Texas)
We filed a patent infringement action in the Western District of Texas against Texas Instruments ("TI") in 2023, alleging infringement of
ParkerVision v. NXP Semiconductors (Western District of Texas)
We filed a patent infringement action in the Western District of Texas against NXP Semiconductors ("NXP") in 2023, alleging infringement of
Additional Patent Infringement Cases – Western District of Texas
ParkerVision filed a number of patent cases in the Western District of Texas in 2020 including cases against (i) Hisense Co., Ltd. and Hisense Visual Technology Co., Ltd (collectively “Hisense”), a Chinese company, (ii) Buffalo Inc., a Japanese company (“Buffalo”) and (iii) Zyxel Communications Corporation, a Chinese multinational electronics company headquartered in Taiwan, (“Zyxel”). Each case alleged infringement of the same ten patents by products that incorporate modules containing certain WiFi semiconductors manufactured by Realtek and/or MediaTek. We dismissed the actions against Buffalo and Zyxel in 2021 following satisfaction of the parties' obligations under patent license and settlement agreements. In November 2022, we dismissed two cases against Hisense following satisfaction of the parties' obligations under a patent license and settlement agreement.
Intel (USPTO) v. ParkerVision (PTAB)
Intel filed IPR petitions against U.S. patent 7,539,474 (“the ‘474 Patent”), U.S. patent 7,110,444 ("the ‘444 Patent"), and U.S. patent 8,190,108 (“the ‘108 patent”) which were all patents asserted in ParkerVision v. Intel in the Western District of Texas. In January 2022, the PTAB issued its final decision for the '474 Patent, ruling in our favor with respect to the seven challenged claims. In January 2022, the PTAB also issued its final decision for the '444 Patent, determining that the single challenged claim of the '444 Patent was unpatentable. In July 2022, we appealed the PTAB decision on the '444 Patent to the Federal Circuit and in December 2023, the appellate court issued its written opinion affirming the PTAB's decision. In June 2022, the PTAB issued its final decision for the '108 Patent, determining that the challenged claims of the '108 Patent were unpatentable. We appealed this decision and anticipate a hearing date on our appeal by April 2024. Following our February 2023 resolution of the infringement actions against Intel, Intel withdrew from the IPR cases; however the U.S. Patent and Trademark Office ("USPTO") has exercised its right to intervene to defend the PTAB's decisions.
14. STOCK AUTHORIZATION AND ISSUANCE
Preferred Stock
We have
Common Stock
We have
As of December 31, 2023, we have
Stock and Warrant Issuances – Equity Based Financings
The following table presents a summary of completed equity-based financing transactions for the years ended December 31, 2023 and 2022 (in thousands, except for per share amounts):
| Date | Transaction | # of Common Shares/ Units Sold | Average Price per Share/ Unit | Net Proceeds (1) | |||||||||
| November 2022 | Private placement of common stock | $ | $ | ||||||||||
| December 2022 | Private placement of common stock | $ | $ | ||||||||||
| January 2023 | Private placement of common stock | $ | $ | ||||||||||
| (1) | After deduction of applicable offering costs. |
Private Placements
In January 2023, we entered into securities purchase agreements with accredited investors for the sale of an aggregate of
Stock, Option and Warrant Issuances – Payment for Services
In April 2023, we entered into a consulting services agreement with Lewis Titterton to provide short-term advisory services to our chief executive officer in connection with the restructuring of the Brickell funding agreements. As consideration for services under the agreement, we issued
In January 2023, we extended a prior consulting agreement with Intro-Act to provide research and shareholder relations services. We issued
On November 22, 2022, we entered into an agreement with a third party to provide consulting services. As consideration for services provided under the twelve-month term of the agreement, we issued non-plan options to purchase
In October 2022, we entered into an agreement with Tailwinds Research Group LLC (“Tailwinds”) to provide continuing digital marketing services to us through December 2024. As consideration for services to be provided under the term of the agreement, we extended the expiration date for warrants previously issued to Tailwinds in 2020 under a prior services agreement. The warrants allow for the purchase of up to
In addition, from time to time, we issue share-based compensation awards under our equity compensation plans to third-party consultants. During the year ended December 31, 2023, we issued an aggregate of
Common Stock Warrants
On December 18, 2023, we modified a 2018 warrant agreement with Brickell for the purchase of up to
We had outstanding warrants for the purchase of up to
15. SHARE-BASED COMPENSATION
For the years ended December 31, 2023 and 2022, we recognized share-based compensation expense of approximately $
Stock Incentive Plans
2019 Long-Term Incentive Equity Plan
We adopted a long-term incentive equity plan in August 2019 that, as amended in January 2021 and January 2023, provides for the grant of stock-based awards to employees, officers, directors, and consultants, not to exceed
2011 Long-Term Incentive Equity Plan
We adopted a shareholder approved long-term incentive equity plan in September 2011 that was amended in 2014, 2016 and 2017 and provided for the grant of stock-based awards to employees, officers, directors and consultants, not to exceed
2008 Equity Incentive Plan
We adopted an equity incentive plan in August 2008 (the “2008 Plan”) for the grant of stock-based awards to employees (excluding named executives), directors and consultants, not to exceed
Restricted Stock Awards
RSAs are issued as executive and employee incentive compensation and as payment for services to others. The value of the award is based on the closing price of our common stock on the date of grant. RSAs are generally immediately vested. From time to time, we issue fully vested share-based compensation awards to third parties as prepaid retainers for services over a specified period. The grant date fair value of these awards is recorded as prepaid services and expensed to selling, general and administrative expense over the service period (see Note 5).
Restricted Stock Units
RSUs are issued as incentive compensation to executives, employees, and non-employee directors. Each RSU represents a right to one share of our common stock, upon vesting. The RSUs are not entitled to voting rights or dividends, if any, until vested. RSUs generally vest over a to year period for employee awards and a year period for non-employee director awards. The fair value of RSUs is generally based on the closing price of our common stock on the date of grant and is amortized to share-based compensation expense over the estimated life of the award, generally the vesting period.
RSAs and RSUs
The following table presents a summary of RSA and RSU activity under the 2011 and 2019 Plans (collectively, the “Stock Plans”) as of December 31, 2023 (shares in thousands):
| Non-vested Shares | ||||||||
| Shares | Weighted-Average Grant Date Fair Value | |||||||
| Non-vested at beginning of year | ||||||||
| Granted | ||||||||
| Vested | ( | ) | ||||||
| Forfeited | ||||||||
| Non-vested at end of year | $ | |||||||
The total fair value of RSAs and RSUs vested under the Stock Plans for the years ended December 31, 2023 and 2022 was approximately $
Stock Options
Stock options are issued as incentive compensation to executives, employees, consultants and non-employee directors. Stock options are granted with exercise prices at or above fair market value of the underlying shares at the date of grant. Fair market value of the underlying shares is determined based on observable market prices at the date of the grant. The fair value of options granted is estimated using the Black-Scholes option pricing model. Generally, fair value is determined as of the grant date. Options for employees, including executives and non-employee directors, are generally granted under the Stock Plans.
The following table presents a summary of option activity under the Stock Plans for the year ended December 31, 2023 (shares in thousands):
| Shares | Weighted- Average Exercise Price | Weighted-Average Remaining Contractual Term (in years) | Aggregate Intrinsic Value ($) | |||||||||||||
| Outstanding at beginning of year | $ | |||||||||||||||
| Granted | ||||||||||||||||
| Exercised | ( | ) | ||||||||||||||
| Forfeited/Expired | ( | ) | ||||||||||||||
| Outstanding at end of year | $ | |||||||||||||||
| Vested at end of year | $ | $ | ||||||||||||||
The weighted average per share fair value of options granted under the Stock Plans during the years ended December 31, 2023 and 2022 was $
The fair value of option grants under the Stock Plans for the years ended December 31, 2023 and 2022, respectively, was estimated using the Black-Scholes option-pricing model with the following assumptions:
| Year ended December 31, | ||||||
| 2023 | 2022 | |||||
| Expected option term (in years) 1 | | | ||||
| Expected volatility factor 2 | | | ||||
| Risk-free interest rate 3 | | | ||||
| Expected annual dividend yield | | | ||||
1 The expected term was generally determined based on historical activity for grants with similar terms and for similar groups of employees and represents the period of time that options are expected to be outstanding. For employee options, groups of employees with similar historical exercise behavior are considered separately for valuation purposes.
2 The stock volatility for each grant is measured using the weighted average of historical daily price changes of our common stock over the most recent period equal to the expected option life of the grant.
3 The risk-free interest rate for periods equal to the expected term of the share option is based on the U.S. Treasury yield curve in effect at the measurement date.
Options by Price Range
The options outstanding at December 31, 2023 under the Stock Plans have exercise price ranges, weighted average contractual lives, and weighted average exercise prices as follows (weighted average lives in years and shares in thousands):
| Options Outstanding | Options Vested | |||||||||||||||||||||||
| Range of Exercise Prices | Number Outstanding at December 31, 2023 | Wtd. Avg. Exercise Price | Wtd. Avg. Remaining Contractual Life | Number Exercisable at December 31, 2023 | Wtd. Avg. Exercise Price | Wtd. Avg. Remaining Contractual Life | ||||||||||||||||||
| $0.171 - $0.3001 | $ | $ | ||||||||||||||||||||||
| $0.33 - $0.495 | ||||||||||||||||||||||||
| $0.50 - $0.75 | ||||||||||||||||||||||||
| $1.98 - $2.97 | ||||||||||||||||||||||||
| $ | $ | |||||||||||||||||||||||
We issue new shares of our common stock upon exercise of options or vesting of RSUs or RSAs under the Stock Plans. The shares underlying the Stock Plans are registered. Cash received from option exercises for the years ended December 31, 2023 and 2022, was $
16. RELATED PARTY TRANSACTIONS