prkr-20200817_resalesupp18
Filed pursuant to Rule 424(b)(3)
Registration No. 333-237762
PROSPECTUS SUPPLEMENT No. 6
(to Prospectus dated April 28, 2020)
PARKERVISION, INC.
16,809,295 Shares of Common Stock
This
Prospectus Supplement relates to the prospectus dated April 28,
2020, as amended and supplemented from time to time (the
“Prospectus”), which permits the resale by the selling
stockholders listed in the Prospectus of up to 16,809,295 shares of
our common stock, par value $0.01 per share (“Common
Stock”) consisting of (i) up to 4,961,538 shares of Common
Stock issuable upon conversion of, and for the payment of interest
from time to time at our option, for a convertible promissory note
dated September 13, 2019 which has a fixed conversion price of
$0.10 per share and convertible promissory notes dated January 8,
2020 which have a fixed conversion price of $0.13 per share (the
“Notes”), (ii) an aggregate of 3,907,331 shares of
Common Stock issued pursuant to securities purchase agreements
dated January 9, 2020, January 15, 2020, March 5, 2020 and March
19, 2020, (iii) an aggregate of 2,740,426 shares of Common Stock
issued as payment for services and repayment of short-term loans
and other accounts payable, including interest, (iv) up to
5,000,000 shares of Common Stock issuable upon exercise of a
five-year warrant with an exercise price of $0.74 per share,
subject to adjustment and issued pursuant to a warrant agreement
with Aspire Capital Fund LLC (“Aspire”) and (v) up to
200,000 shares of Common stock issuable upon exercise of a
three-year warrant with an exercise price of $1.00 per share,
subject to adjustment and issued pursuant to a warrant agreement
with Tailwinds Research Group LLC
(“Tailwinds”).
We will
not receive proceeds from the sale of the shares of Common Stock by
the selling stockholders. To the extent the Aspire and Tailwinds
warrants are exercised for cash, we will receive up to an aggregate
of $3,900,000 in gross proceeds. We expect to use proceeds received
from the exercise of the Aspire and Tailwinds warrants, if any, for
general working capital and corporate purposes.
This
Prospectus Supplement is being filed to update and supplement the
information previously included in the Prospectus with the
information contained in our Quarterly Report on Form 10-Q filed
with the Securities and Exchange Commission (the “SEC”)
on August 14, 2020. Accordingly, we have attached the 10-Q to this
prospectus supplement. You should read this prospectus supplement
together with the prospectus, which is to be delivered with this
prospectus supplement.
Any
statement contained in the Prospectus shall be deemed to be
modified or superseded to the extent that information in this
Prospectus Supplement modifies or supersedes such statement. Any
statement that is modified or superseded shall not be deemed to
constitute a part of the Prospectus except as modified or
superseded by this Prospectus Supplement.
This
Prospectus Supplement should be read in conjunction with, and may
not be delivered or utilized without, the Prospectus.
Our
Common Stock is listed on the OTCQB Venture Capital Market under
the ticker symbol “PRKR.”
Investing in our securities involves a high degree of risk. See
“Risk Factors”
beginning on page 6 of this prospectus for a discussion of
information that should be considered in connection with an
investment in our securities.
Neither the SEC nor any such authority has approved or disapproved
these securities or determined whether this prospectus is truthful
or complete. Any representation to the contrary is a criminal
offense.
The
date of this Prospectus Supplement is August 18, 2020.
SECURITIES AND
EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM 10-Q
(Mark
One)
|
|
☒
|
QUARTERLY REPORT
PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
For the quarterly period ended
June 30, 2020
|
TRANSITION REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
☐
|
TRANSITION REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
For the transition
period from ________to____________
Commission file
number 000-22904
PARKERVISION, INC.
(Exact name of
registrant as specified in its charter)
|
|
|
Florida
|
|
59-2971472
|
(State or other
jurisdiction of incorporation or organization)
|
|
(I.R.S. Employer
Identification No)
|
9446 Philips
Highway,
Suite
5A
Jacksonville, Florida 32256
(Address of
principal executive offices)
(904)
732-6100
(Registrant’s
telephone number, including area code)
N/A
(Former name,
former address and former fiscal year, if changed since last
report)
Securities
registered pursuant to Section 12(b) of the Act:
|
|
|
Title of Each
Class
|
Trading
Symbol
|
Name of Each Exchange
on Which Registered
|
Common Stock, $.01 par
value
|
PRKR
|
OTCQB
|
Common Stock
Rights
|
|
OTCQB
|
Indicate by check
mark whether the registrant (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90
days. Yes ☒ No ☐ .
Indicate by check
mark whether the registrant has submitted electronically every
Interactive Data File required to be submitted pursuant
to Rule 405 of Regulation S-T during the preceding 12 months (or
for such shorter period that the registrant was required to submit
such file).
Yes ☒ No ☐ .
Indicate by check
mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, smaller reporting
company, or an emerging growth company. See the
definitions of “large accelerated filer,”
“accelerated filer,” “smaller reporting
company,” and “emerging growth company” in Rule
12b-2 of the Exchange Act:
|
|
|
Large accelerated
filer ☐
|
|
Accelerated
filer ☐
|
Non-accelerated
filer ☒
|
|
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 accounting standards provided pursuant to
Section 13(a) of the Exchange Act. ☐
Indicate by check
mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange
Act). Yes ☐ No ☒
As of August 12,
2020, 49,812,954 shares of the issuer’s common stock, $.01
par value, were outstanding.
TABLE OF CONTENTS
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2
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20
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25
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25
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|
|
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|
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26
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26
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26
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26
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26
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26
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27
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29
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PA RT I - FINANCIAL
INFORMATION
ITEM 1. Financial
Statements (Unaudited)
PARKERVISION,
INC.
CONDENSED
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(in thousands,
except par value data)
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30,
|
|
December
31,
|
|
2020
|
|
2019
|
CURRENT
ASSETS:
|
|
|
|
|
|
Cash and cash
equivalents
|
$
|
543
|
|
$
|
57
|
Prepaid
expenses
|
|
569
|
|
|
505
|
Other current
assets
|
|
25
|
|
|
117
|
Total current
assets
|
|
1,137
|
|
|
679
|
|
|
|
|
|
|
Operating lease
right-of-use assets
|
|
14
|
|
|
283
|
Intangible assets,
net
|
|
2,447
|
|
|
2,878
|
Other assets,
net
|
|
74
|
|
|
86
|
Total
assets
|
$
|
3,672
|
|
$
|
3,926
|
|
|
|
|
|
|
CURRENT
LIABILITIES:
|
|
|
|
|
|
Accounts
payable
|
$
|
4,284
|
|
$
|
2,328
|
Accrued
expenses:
|
|
|
|
|
|
Salaries and
wages
|
|
87
|
|
|
78
|
Professional
fees
|
|
165
|
|
|
499
|
Statutory court
costs
|
|
327
|
|
|
369
|
Other accrued
expenses
|
|
492
|
|
|
1,081
|
Related party note
payable, current portion
|
|
98
|
|
|
86
|
Secured note
payable, current portion
|
|
24
|
|
|
1,222
|
Unsecured notes
payable
|
|
64
|
|
|
225
|
Operating lease
liabilities, current portion
|
|
165
|
|
|
250
|
Total current
liabilities
|
|
5,706
|
|
|
6,138
|
|
|
|
|
|
|
LONG-TERM
LIABILITIES:
|
|
|
|
|
|
Secured contingent
payment obligation
|
|
28,685
|
|
|
26,651
|
Convertible notes,
net
|
|
2,979
|
|
|
2,733
|
Related party note
payable, net of current portion
|
|
748
|
|
|
793
|
Unsecured
contingent payment obligations
|
|
3,522
|
|
|
-
|
Operating lease
liabilities, net of current portion
|
|
236
|
|
|
305
|
Other long-term
liabilities
|
|
130
|
|
|
403
|
Total long-term
liabilities
|
|
36,300
|
|
|
30,885
|
Total
liabilities
|
|
42,006
|
|
|
37,023
|
|
|
|
|
|
|
SHAREHOLDERS'
DEFICIT:
|
|
|
|
|
|
Common stock, $.01
par value, 110,000 shares authorized, 49,097 and 34,097 shares
issued and outstanding at June 30, 2020
and December 31, 2019, respectively
|
|
491
|
|
|
341
|
Additional paid-in
capital
|
|
374,464
|
|
|
368,345
|
Accumulated
deficit
|
|
(413,289)
|
|
|
(401,783)
|
Total shareholders'
deficit
|
|
(38,334)
|
|
|
(33,097)
|
Total liabilities
and shareholders' deficit
|
$
|
3,672
|
|
$
|
3,926
|
|
|
|
|
|
|
PARKERVISION,
INC.
CONDENSED
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(UNAUDITED)
(in thousands,
except per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
Six Months
Ended
|
|
June 30,
|
|
June 30,
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
Product
revenue
|
$
|
-
|
|
$
|
25
|
|
$
|
-
|
|
$
|
35
|
Cost of
sales
|
|
-
|
|
|
(25)
|
|
|
-
|
|
|
(35)
|
Gross
margin
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and
development expenses
|
|
-
|
|
|
-
|
|
|
-
|
|
|
334
|
Selling, general
and administrative expenses
|
|
2,328
|
|
|
1,851
|
|
|
7,823
|
|
|
4,007
|
Total operating
expenses
|
|
2,328
|
|
|
1,851
|
|
|
7,823
|
|
|
4,341
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
expense
|
|
(115)
|
|
|
(76)
|
|
|
(301)
|
|
|
(138)
|
Change in fair
value of contingent payment obligations
|
|
(1,142)
|
|
|
365
|
|
|
(3,382)
|
|
|
823
|
Total interest and
other
|
|
(1,257)
|
|
|
289
|
|
|
(3,683)
|
|
|
685
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
(3,585)
|
|
|
(1,562)
|
|
|
(11,506)
|
|
|
(3,656)
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive
loss, net of tax
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive
loss
|
$
|
(3,585)
|
|
$
|
(1,562)
|
|
$
|
(11,506)
|
|
$
|
(3,656)
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted
net loss per common share
|
$
|
(0.08)
|
|
$
|
(0.05)
|
|
$
|
(0.27)
|
|
$
|
(0.12)
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average
common shares outstanding
|
|
45,393
|
|
|
30,888
|
|
|
41,861
|
|
|
30,042
|
|
|
|
|
|
|
|
|
|
|
|
|
PARKERVISION,
INC.
CONDENSED
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ DEFICIT
(UNAUDITED)
(in
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock, Par
Value
|
|
Additional
Paid-in
Capital
|
|
Accumulated
Deficit
|
|
Total
Shareholders'
Deficit
|
Balance as of December 31,
2019
|
|
$
|
341
|
|
$
|
368,345
|
|
$
|
(401,783)
|
|
$
|
(33,097)
|
Issuance of common
stock and warrants in private offerings, net of issuance costs and
initial fair value of contingent payment rights
|
|
|
39
|
|
|
2,811
|
|
|
-
|
|
|
2,850
|
Issuance of common
stock upon exercise of warrants
|
|
|
14
|
|
|
487
|
|
|
-
|
|
|
501
|
Issuance of common
stock and warrants for services
|
|
|
5
|
|
|
219
|
|
|
-
|
|
|
224
|
Issuance of
convertible debt with beneficial conversion feature
|
|
|
-
|
|
|
173
|
|
|
-
|
|
|
173
|
Issuance of common
stock upon conversion of and payment of interest-in-kind on
convertible debt
|
|
|
7
|
|
|
187
|
|
|
-
|
|
|
194
|
Issuance of common
stock upon conversion of short-term loans and payables
|
|
|
22
|
|
|
318
|
|
|
-
|
|
|
340
|
Share-based
compensation, net of shares withheld for taxes
|
|
|
3
|
|
|
458
|
|
|
-
|
|
|
461
|
Comprehensive loss
for the period
|
|
|
-
|
|
|
-
|
|
|
(7,921)
|
|
|
(7,921)
|
Balance as of March 31,
2020
|
|
$
|
431
|
|
$
|
372,998
|
|
$
|
(409,704)
|
|
$
|
(36,275)
|
Issuance of common
stock and warrants in private offerings, net of issuance costs and
initial fair value of contingent payment rights
|
|
|
43
|
|
|
725
|
|
|
-
|
|
|
768
|
Issuance of common
stock upon exercise of warrants
|
|
|
11
|
|
|
363
|
|
|
-
|
|
|
374
|
Issuance of common
stock and warrants for services
|
|
|
1
|
|
|
13
|
|
|
-
|
|
|
14
|
Issuance of common
stock upon conversion and payment of interest-in-kind on
convertible debt
|
|
|
1
|
|
|
66
|
|
|
-
|
|
|
67
|
Share-based
compensation, net of shares withheld for taxes
|
|
|
4
|
|
|
299
|
|
|
-
|
|
|
303
|
Comprehensive loss
for the period
|
|
|
-
|
|
|
-
|
|
|
(3,585)
|
|
|
(3,585)
|
Balance as of June 30,
2020
|
|
$
|
491
|
|
$
|
374,464
|
|
$
|
(413,289)
|
|
$
|
(38,334)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock, Par
Value
|
|
Additional
Paid-in
Capital
|
|
Accumulated
Deficit
|
|
Total
Shareholders'
Deficit
|
Balance as of December 31,
2018
|
|
$
|
287
|
|
$
|
366,695
|
|
$
|
(392,292)
|
|
$
|
(25,310)
|
Cumulative effect
of change in accounting principle
|
|
|
-
|
|
|
-
|
|
|
(38)
|
|
|
(38)
|
Issuance of common
stock upon exercise of warrants
|
|
|
15
|
|
|
-
|
|
|
-
|
|
|
15
|
Issuance of common
stock upon conversion and payment of interest-in-kind on
convertible debt
|
|
|
4
|
|
|
76
|
|
|
-
|
|
|
80
|
Share-based
compensation, net of shares withheld for taxes
|
|
|
-
|
|
|
67
|
|
|
-
|
|
|
67
|
Comprehensive loss
for the period
|
|
|
-
|
|
|
-
|
|
|
(2,094)
|
|
|
(2,094)
|
Balance as of March 31,
2019
|
|
|
306
|
|
|
366,838
|
|
|
(394,424)
|
|
|
(27,280)
|
Issuance of common
stock and warrants in public and private offerings, net of issuance
costs
|
|
|
6
|
|
|
54
|
|
|
-
|
|
|
60
|
Issuance of common
stock upon exercise of warrants
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
Issuance of common
stock upon conversion and payment of interest-in-kind on
convertible debt
|
|
|
5
|
|
|
43
|
|
|
-
|
|
|
48
|
Share-based
compensation, net of shares withheld for taxes
|
|
|
-
|
|
|
48
|
|
|
-
|
|
|
48
|
Comprehensive loss
for the period
|
|
|
-
|
|
|
-
|
|
|
(1,562)
|
|
|
(1,562)
|
Balance as of June 30,
2019
|
|
$
|
317
|
|
$
|
366,983
|
|
$
|
(395,986)
|
|
$
|
(28,686)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PARKERVISION,
INC.
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(in
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months
Ended
|
|
June 30,
|
|
2020
|
|
2019
|
CASH FLOWS FROM
OPERATING ACTIVITIES:
|
|
|
|
|
|
Net
loss
|
$
|
(11,506)
|
|
$
|
(3,656)
|
Adjustments to
reconcile net loss to net cash used in
operating activities:
|
|
|
|
|
|
Depreciation and
amortization
|
|
358
|
|
|
411
|
Share-based
compensation
|
|
764
|
|
|
115
|
Noncash lease
expense
|
|
57
|
|
|
199
|
Loss (gain) on
changes in fair value of contingent payment
obligations
|
|
3,382
|
|
|
(823)
|
Loss on
disposal/impairment of equipment and other assets
|
|
394
|
|
|
215
|
Noncash expense for
amendment of equity-related agreements
|
|
2,211
|
|
|
-
|
Changes in
operating assets and liabilities:
|
|
|
|
|
|
Accounts
receivable
|
|
-
|
|
|
1
|
Inventories
|
|
-
|
|
|
40
|
Prepaid expenses
and other assets
|
|
266
|
|
|
15
|
Accounts payable
and accrued expenses
|
|
1,251
|
|
|
1,081
|
Operating lease
liabilities
|
|
(154)
|
|
|
(148)
|
Total
adjustments
|
|
8,529
|
|
|
1,106
|
Net cash used in
operating activities
|
|
(2,977)
|
|
|
(2,550)
|
|
|
|
|
|
|
CASH FLOWS FROM
INVESTING ACTIVITIES:
|
|
|
|
|
|
Proceeds from sale
of property and equipment
|
|
-
|
|
|
23
|
Purchases of
property and equipment
|
|
(3)
|
|
|
-
|
Payments for patent
costs and other intangible assets
|
|
-
|
|
|
(17)
|
Net cash (used in)
provided by investing activities
|
|
(3)
|
|
|
6
|
|
|
|
|
|
|
CASH FLOWS FROM
FINANCING ACTIVITIES:
|
|
|
|
|
|
Net proceeds from
issuance of common stock, including contingent payment rights, in
private offerings
|
|
2,578
|
|
|
-
|
Net proceeds from
exercise of options and warrants
|
|
875
|
|
|
15
|
Net proceeds from
debt financings
|
|
1,244
|
|
|
1,865
|
Principal payments
on long-term debt
|
|
(1,231)
|
|
|
(800)
|
Net cash provided
by financing activities
|
|
3,466
|
|
|
1,080
|
|
|
|
|
|
|
NET INCREASE
(DECREASE) IN CASH AND CASH EQUIVALENTS
|
|
486
|
|
|
(1,464)
|
|
|
|
|
|
|
CASH AND CASH
EQUIVALENTS, beginning of period
|
|
57
|
|
|
1,527
|
|
|
|
|
|
|
CASH AND CASH
EQUIVALENTS, end of period
|
$
|
543
|
|
$
|
63
|
|
|
|
|
|
|
PARKERVISION,
INC.
NOTES TO CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. Description of
Business
ParkerVision, Inc.
and its wholly-owned German subsidiary, ParkerVision GmbH
(collectively “ParkerVision”, “we” or the
“Company”) is in the business of innovating fundamental
wireless technologies and products.
We have designed
and developed proprietary radio frequency (“RF”)
technologies and integrated circuits for use in wireless
communication products. We have expended significant financial and
other resources to research and develop our RF technologies and to
obtain patent protection for those technologies in the United
States of America (“U.S.”) and certain foreign
jurisdictions. We believe certain patents
protecting our proprietary technologies have been broadly
infringed by others and therefore the primary focus of our business
plan is the enforcement of our intellectual property rights through
patent infringement litigation and licensing efforts. We
currently have patent enforcement actions ongoing in various U.S.
district courts against mobile handset and smart television
providers and, in certain cases, their chip suppliers for the
infringement of several of our RF patents. We have made
significant investments in developing and protecting our
technologies, the returns on which are dependent upon the
generation of future revenues for realization.
We also designed,
developed and marketed a distributed WiFi product line under the
brand name Milo®. We restructured our operations in
2018 to reduce operating expenses in light of our limited capital
resources. Accordingly, we significantly reduced our
ongoing investment in the Milo products. In early 2019,
we ceased substantially all ongoing research and development
efforts and, where applicable, repurposed resources to support our
patent enforcement and product sales and support
efforts. We ceased sales of our Milo products in the
fourth quarter of 2019 and are currently focused exclusively on our
patent enforcement litigation and licensing efforts.
2. Liquidity and
Going Concern
Our accompanying
condensed consolidated financial statements were prepared assuming
we would continue as a going concern, which contemplates that we
will continue in operation for the foreseeable future and will be
able to realize assets and settle liabilities and commitments in
the normal course of business for a period of at least one year
from the issuance date of these condensed consolidated financial
statements. These condensed consolidated financial
statements do not include any adjustments to reflect the possible
future effects on the recoverability and classification of assets
or the amounts and classification of liabilities that could result
should we be unable to continue as a going concern.
We have incurred
significant losses from operations and negative cash flows from
operations in every year since inception and have utilized the
proceeds from the sales of debt and equity securities and
contingent funding arrangements with third-parties to fund our
operations, including the cost of litigation. For the
six months ended June 30, 2020, we incurred a net loss of
approximately $11.5 million and negative cash flows from
operations of approximately $3.0 million. At June
30, 2020, we had cash and cash equivalents of approximately $0.5
million, a working capital deficit of approximately
$4.6 million and an accumulated deficit of approximately
$413.3 million. These circumstances raise
substantial doubt about our ability to continue to operate as a
going concern for a period of one year following the issue date of
these condensed consolidated financial statements.
For the six months
ended June 30, 2020, we received aggregate net proceeds from debt
and equity financings of approximately $3.8 million and proceeds
from the exercise of outstanding warrants of approximately $0.9
million. In addition, we repaid approximately $0.7 million in
short-term debt and other accrued expenses through the use of
shares of our common stock. Despite these funding
efforts, our resources are not sufficient to meet our short-term
liquidity needs and we will be required to seek additional
capital.
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 and (ii) 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 be sufficient to cover our working capital
requirements. 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
equity securities or other financing
arrangements.
In July, we
received aggregate net proceeds of $0.2 million from the sale of
equity securities with contingent payment rights to our patent
enforcement proceeds, if any. We are exploring
additional financing opportunities for both our short and long-term
capital needs. These financing opportunities may include
debt, convertible debt, common or preferred equity offerings, or a
combination thereof. There can be no assurance that we
will be able to consummate a financing transaction or that the
terms of such financing will be on terms and conditions that are
acceptable.
We expect to
continue to invest in the support of our patent enforcement and
licensing programs. The long-term continuation of our
business plan is dependent upon the generation of sufficient
revenues from our technologies and/or products to offset expenses
and contingent payment obligations. In the event that we
do not generate sufficient revenues, we will be required to obtain
additional funding through public or private debt or equity
financing or contingent fee arrangements and/or reduce operating
costs. Failure to generate sufficient revenues, raise
additional capital through debt or equity financings or contingent
fee arrangements, and/or reduce operating costs will have a
material adverse effect on our ability to meet our long-term
liquidity needs and achieve our intended long-term business
objectives.
3. Basis of
Presentation
The accompanying
unaudited condensed consolidated financial statements for the
period ended June 30, 2020 were prepared in accordance with
generally accepted accounting principles (“GAAP”) for
interim financial information and with the instructions to Form
10-Q and Rule 10-01 of Regulation S-X. Operating results
for the three and six months ended June 30, 2020 are not
necessarily indicative of the results that may be expected for the
year ending December 31, 2020 or future
years. Certain reclassifications have been made to prior
period amounts to conform to the current period presentation.
All normal and recurring adjustments which, in the opinion of
management, are necessary for a fair statement of the consolidated
financial condition and results of operations have been
included.
The year-end
condensed consolidated balance sheet data was derived from audited
financial statements for the year ended December 31, 2019, but
does not include all disclosures required by GAAP. These
interim condensed consolidated financial statements should be read
in conjunction with our latest Annual Report on Form 10-K for the
year ended December 31, 2019 (“2019 Annual
Report”).
The condensed
consolidated financial statements include the accounts of
ParkerVision, Inc. and its wholly-owned German subsidiary,
ParkerVision GmbH, after elimination of all intercompany
transactions and accounts.
4. Accounting
Policies
There have been no
changes in accounting policies from those stated in our 2019 Annual
Report. We do not expect any newly effective accounting
standards to have a material impact on our financial position,
results of operations or cash flows when they become
effective.
5. Loss per Common
Share
Basic loss per
common share is determined based on the weighted-average number of
common shares outstanding during each period. Diluted
loss per common share is the same as basic loss per common share as
all common share equivalents are excluded from the calculation, as
their effect is anti-dilutive.
We have shares underlying
outstanding options, warrants, unvested RSUs and convertible notes
that were excluded from the computation of diluted loss per share
as their effect would have been anti-dilutive. These
common share equivalents at June 30, 2020 and 2019 were as follows
(in thousands):
|
|
|
|
|
|
|
June 30,
|
|
2020
|
|
2019
|
Options
outstanding
|
|
12,248
|
|
|
1,082
|
Warrants
outstanding
|
|
14,850
|
|
|
11,700
|
Unvested
RSUs
|
|
394
|
|
|
-
|
Shares underlying
convertible notes
|
|
23,807
|
|
|
11,096
|
|
|
51,299
|
|
|
23,878
|
|
|
|
|
|
|
6. Prepaid
Expenses
Prepaid expenses
consist of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30,
|
|
December
31,
|
|
|
2020
|
|
2019
|
Prepaid
services
|
|
$
|
284
|
|
$
|
221
|
Prepaid bonds for
German statutory costs
|
|
|
188
|
|
|
188
|
Prepaid
insurance
|
|
|
59
|
|
|
62
|
Prepaid licenses,
software tools and support
|
|
|
21
|
|
|
17
|
Other prepaid
expenses
|
|
|
17
|
|
|
17
|
|
|
$
|
569
|
|
$
|
505
|
|
|
|
|
|
|
|
Prepaid services
include approximately $0.2 million and $0.1 million of consulting
services paid in shares of stock or warrants to purchase shares of
stock in the future at June 30, 2020, and December 31, 2019,
respectively.
7. Intangible
Assets
Intangible assets
consist of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30,
|
|
December
31,
|
|
|
2020
|
|
2019
|
Patents and
copyrights
|
|
$
|
15,310
|
|
$
|
16,612
|
Accumulated
amortization
|
|
|
(12,863)
|
|
|
(13,734)
|
|
|
$
|
2,447
|
|
$
|
2,878
|
|
|
|
|
|
|
|
8. Operating Lease
Right-of-Use Assets
For the six months
ended June 30, 2020, we recognized an impairment loss of
approximately $0.2 million on the right-of-use asset related to our
Lake Mary office lease. We ceased use of this facility
in 2018 as part of our restructuring of operation. The
value of our right-of-use asset included estimated future sublease
income. Due to a number of factors, including the high
vacancy rate of the building in which the space is located and the
current COVID-19 environment, we determined securing a sublease for
the space would be unlikely. Accordingly, we recognized an
impairment loss, which represented the remaining carrying value of
the asset as of June 30, 2020. The impairment is included in
selling, general, and administrative expenses in our condensed
consolidated statements of comprehensive loss.
9. Debt
Notes
Payable
Related Party
Note
Payable
We have an
unsecured promissory note of approximately $0.8 million payable to
Sterne, Kessler, Goldstein, & Fox, PLLC (“SKGF”), a
related party, for outstanding unpaid fees for legal
services. The SKGF note, as amended, accrues interest at
a rate of 4% per annum, requires repayments of principal and
interest at a rate of $10,000 per month with a final balloon
payment due in April 2022. We are currently in
compliance with all the terms of the note, as amended.
Secured Note
Payable
We have a note
payable to Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
(“Mintz”) for outstanding, unpaid attorney’s fees
and costs associated with our patent enforcement program. The Mintz
note is non-interest bearing, except in the event of a default, and
is secured by certain of our U.S. and foreign patents. The note, at
Mintz’s option, accelerates and becomes immediately due and
payable in the case of standard events of default and/or in the
event of a sale or other transfer of substantially all of our
assets or a transfer of more than 50% of our capital stock in one
or a series of transactions or through a merger or other similar
transaction.
We have been in
default on the payment terms of the note since November 17, 2019,
and accordingly, have accrued interest at the default rate of 12%
per annum. Currently, Mintz has not requested acceleration of
unpaid principal and interest on the note, nor have they waived the
outstanding default. During the six months ended June 30, 2020, we
made payments to Mintz of $1.2 million, which we applied to
outstanding principal and interest on the Mintz note, leaving an
outstanding balance, including accrued default interest, at June
30, 2020 of approximately $0.02 million. Mintz disputes
our application of payments against principal and interest on the
note rather than against the $3.1 million in billed and unpaid fees
and expenses payable to Mintz included in accounts payable at June
30, 2020. The unpaid fees and expenses payable to Mintz
at June 30, 2020 exclude approximately $3.6 million in fees billed
by
Mintz that are in
excess of agreed-upon fee caps. We consider the excess
fees to be a loss contingency that is not probable as of the
issuance date of these condensed consolidated financial statements
and, accordingly, we have not recognized these excess fees in
expense for the period ended June 30, 2020. We are in
discussions with Mintz to resolve our outstanding fee dispute with
regard to amounts billed and payable as well as any success fees
payable on potential future proceeds.
Unsecured Notes
Payable
Unsecured notes
payable at June 30, 2020 represents the current portion of our
Paycheck Protection Program loan, as described more fully
below. Unsecured notes payable at December 31, 2019
represents the outstanding principal balance of unsecured
short-term promissory notes with accredited investors for aggregate
proceeds of approximately $0.23 million. The notes, as amended,
accrued interest at a rate of 20% per annum. During the six
months ended June 30, 2020, we issued an aggregate of 1,740,426
shares of our common stock as an in-kind repayment of all
outstanding principal and accrued interest on these short-term
notes.
Paycheck Protection Program
Loan
In May 2020, we
received approximately $0.2 million in proceeds from an approved
loan under the Paycheck Protection Program. Interest
will accrue on outstanding principal balance at a rate of 1%,
computed on a simple interest basis. The loan principal
and accrued interest will be eligible for forgiveness provided that
(i) we use the loan proceeds exclusively for allowed costs
including payroll, employee group health benefits, rent and
utilities and (ii) employee and compensation levels are
maintained. If the loan is not forgiven, we will be
required to make monthly repayments of approximately $8,000 per
month commencing November 1, 2020 and the loan will mature on May
3, 2022, at which time any unpaid principal and accrued interest
will be due and payable. The current and noncurrent
portions of this loan are included in the captions “Unsecured
notes payable” and “Other long-term liabilities”
in the condensed consolidated balance sheet as of June 30,
2020.
Convertible
Notes
Our convertible
notes represent five-year promissory notes that are convertible, at
the holders’ option, into shares of our common stock at fixed
conversion prices. The notes bear interest at a stated
rate of 8% per annum, except for the July 18, 2019 notes which bear
interest at a stated rate of 7.5% per annum. Interest is
payable quarterly, and we may elect to pay interest in either cash,
shares of our common stock, or a combination thereof, subject to
certain equity conditions. To date, all interest payments on
the convertible notes have been made in shares of our common stock,
including payments of $0.14 million during the six months ended
June 30, 2020.
We have the option
to prepay the majority of the notes any time following the one-year
anniversary of the issuance of the notes, subject to a premium on
the outstanding principal prepayment amount of 25% prior to the
two-year anniversary of the note issuance date, 20% prior to the
three-year anniversary of the note issuance date, 15% prior to the
four-year anniversary of the note issuance date, or 10%
thereafter. We do not have a prepayment option with
regard to the July 18, 2019 notes or the January 8, 2020
notes.
Notes with a
principal balance of $0.13 million were converted, at the option of
the holder, into shares of our common stock during the six month
period ended June 30, 2020.
Convertible notes
payable at June 30, 2020 and December 31, 2019 consist of the
following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed
|
|
Effective
|
|
|
|
Principal
Outstanding as of
|
|
|
Conversion
|
|
Interest
|
|
|
|
June 30,
|
|
December
31,
|
Description
|
|
Rate
|
|
Rate
|
|
Maturity
Date
|
|
2020
|
|
2019
|
Convertible notes
dated September 10, 2018
|
|
$0.40
|
|
23.4%
|
|
September 7,
2023
|
|
$
|
600
|
|
$
|
700
|
Convertible note
dated September 19, 2018
|
|
$0.57
|
|
10.2%
|
|
September 19,
2023
|
|
|
425
|
|
|
425
|
Convertible notes
dated February/March 2019
|
|
$0.25
|
|
8.0%
|
|
February 28, 2024
to March 13, 2024
|
|
|
1,300
|
|
|
1,300
|
Convertible notes
dated June/July 2019
|
|
$0.10
|
|
8.0%
|
|
June 7, 2024 to
July 15, 2024
|
|
|
365
|
|
|
390
|
Convertible notes
dated July 18, 2019
|
|
$0.08
|
|
46.1%
|
|
July 18,
2024
|
|
|
700
|
|
|
700
|
Convertible notes
dated September 13, 2019
|
|
$0.10
|
|
25.9%
|
|
September 13,
2024
|
|
|
50
|
|
|
50
|
Convertible notes
dated January 8, 2020
|
|
$0.13
|
|
20.3%
|
|
January 8,
2025
|
|
|
450
|
|
|
-
|
Total principal
balance
|
|
|
|
|
|
|
|
|
3,890
|
|
|
3,565
|
Less Unamortized
discount
|
|
|
|
|
|
|
|
|
911
|
|
|
832
|
|
|
|
|
|
|
|
|
$
|
2,979
|
|
$
|
2,733
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Secured Contingent Payment
Obligation
The following table
provides a reconciliation of our secured contingent payment
obligation, measured at estimated fair market value, for the six
months ended June 30, 2020 and the year ended December 31,
2019 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months
Ended
June 30, 2020
|
|
Year Ended
December 31, 2019
|
Secured contingent
payment obligation, beginning of period
|
|
$
|
26,651
|
|
$
|
25,557
|
Change in fair
value
|
|
|
2,034
|
|
|
1,094
|
Secured contingent
payment obligation, end of period
|
|
$
|
28,685
|
|
$
|
26,651
|
|
|
|
|
|
|
|
Our secured
contingent payment obligation represents the estimated fair value
of our repayment obligation to Brickell Key Investments, LP
(“Brickell”) under a February 2016 funding agreement,
as amended. Brickell is entitled to priority
payment of 55% to 100% of proceeds received from all patent-related
actions until such time that Brickell has been repaid in
full. After repayment of the funded amount, which is
$14.7 million as of June 30, 2020, Brickell is entitled to a
portion of remaining proceeds up to a specified minimum return
which is determined as a percentage of the funded amount and varies
based on the timing of repayment. In addition, Brickell
is entitled to a pro rata portion of proceeds from specified legal
actions to the extent aggregate proceeds from those actions exceed
the specified minimum return. As of June 30, 2020, we
are in compliance with our obligations under this
agreement.
We have elected to
measure our secured contingent payment obligation at fair value
based on probability-weighted estimated cash outflows, discounted
back to present value using a discount rate determined in
accordance with accepted valuation methods. The secured
contingent payment obligation is remeasured to fair value at each
reporting period with changes recorded in the condensed
consolidated statements of comprehensive loss until the contingency
is resolved (see Note 10).
Unsecured Contingent Payment
Obligations
The following table
provides a reconciliation of our unsecured contingent payment
obligations, measured at estimated fair market value, for the six
months ended June 30, 2020 and the year ended December 31,
2019 (in thousands):
|
|
|
|
|
|
|
|
|
Six Months
Ended
June 30, 2020
|
|
Year Ended
December 31, 2019
|
Unsecured
contingent payment obligations, beginning of period
|
|
$
|
-
|
|
$
|
-
|
Reclassification of
other liabilities
|
|
|
1,003
|
|
|
-
|
Proceeds from sale
of contingent payment rights
|
|
|
735
|
|
|
-
|
Initial fair market
value of modification
|
|
|
436
|
|
|
-
|
Change in fair
value
|
|
|
1,348
|
|
|
-
|
Unsecured
contingent payment obligations, end of period
|
|
$
|
3,522
|
|
$
|
-
|
|
|
|
|
|
|
|
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 issued to accredited investors in
connection with equity financings (“CPRs”). We have
elected to measure these unsecured contingent payment obligations
at their estimated fair value based on probability-weighted
estimated cash outflows, discounted back to present value using a
discount rate determined in accordance with accepted valuation
methods. The unsecured contingent payment obligations
will be remeasured to fair value at each reporting period with
changes recorded in the condensed consolidated statements of
comprehensive loss until the contingency is resolved (see Note
10).
The Termination Fee
is a result of $1.0 million received as advances under a letter
agreement with a third-party funder. Based on the terms
of the letter agreement, if a final funding arrangement was not
executed by March 31, 2020, we would be obligated to pay, from
future patent-related proceeds, an aggregate termination payment
equal to five times the upfront payment received, or $5.0
million. We did not reach an agreement as of March 31,
2020 and formally terminated negotiations in April
2020. Advances under the letter agreement included $0.4
million as of December 31, 2019, and $0.6 million advanced in
January 2020. The advances, which were initially
recorded in other long-term liabilities, were reclassified to
unsecured contingent payment obligations at March 31, 2020 when the
Termination Fee obligation was incurred. As of June 30,
2020, the estimated fair value of unsecured contingent payment
obligations related to the Termination Fee is $2.4
million.
The CPRs represent
the estimated fair value of rights provided to accredited investors
who purchased shares of our common stock between March and June
2020 (see Note 12). During the six months ended
June 30, 2020, we received proceeds of $1.5 million from the
sale of common stock with contingent payment rights, of which $0.7
million was allocated to the CPRs. In addition, on May
1, 2020, we granted CPRs to purchasers of $0.9 million of our
common stock in March 2020, resulting in a charge to expense of
$0.4 million for the initial estimated fair value of the
CPRs. The terms of the CPRs provide that we will pay
each investor an allocated portion of our net proceeds from
patent-related actions, after taking into account fees and expenses
payable to law firms representing us and amounts payable to
Brickell. The investors’ allocated portion of net
proceeds will be determined by multiplying the net proceeds
recovered by us (up to $10 million) by the quotient of such
investors’ subscription amount divided by $10 million, up to
an amount equal to each investor’s subscription amount, or an
aggregate of $2.4 million. As of June 30, 2020, the
estimated fair value of unsecured contingent payment obligations
related to the CPRs is $1.1 million.
10. Fair Value
Measurements
The following
tables summarize the fair value of our assets and liabilities
measured at fair value on a recurring basis as of June 30, 2020 and
December 31, 2019 (in thousands):
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|
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|
|
|
|
|
|
|
|
Fair Value
Measurements
|
|
|
Total Fair
Value
|
|
Quoted
Prices
in Active
Markets
(Level 1)
|
|
Significant
Other
Observable
Inputs
(Level 2)
|
|
Significant
Unobservable
Inputs
(Level 3)
|
June 30, 2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Secured contingent
payment obligation
|
|
$
|
28,685
|
|
$
|
-
|
|
$
|
-
|
|
$
|
28,685
|
Unsecured
contingent payment obligations
|
|
|
3,522
|
|
|
-
|
|
|
-
|
|
|
3,522
|
|
|
|
|
|
|
|
|
|
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|
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|
|
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|
|
|
|
|
|
|
|
|
|
|
Fair Value
Measurements
|
|
|
Total Fair
Value
|
|
Quoted
Prices
in Active
Markets
(Level 1)
|
|
Significant
Other
Observable
Inputs
(Level 2)
|
|
Significant
Unobservable
Inputs
(Level 3)
|
December 31, 2019:
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Secured contingent
payment obligation
|
|
$
|
26,651
|
|
$
|
-
|
|
$
|
-
|
|
$
|
26,651
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The fair values of
our secured and unsecured contingent payment obligations were
estimated using a probability-weighted income approach based on
various cash flow scenarios as to the outcome of patent-related
actions both in terms of timing and amount, discounted to present
value using a risk-adjusted rate. We used a
risk-adjusted discount rate of 14.18% at June 30, 2020, based on a
risk-free rate of 0.18% as adjusted by 8% for credit risk and 6%
for litigation inherent risk.
The following table
provides quantitative information about the significant
unobservable inputs used in the measurement of fair value for both
the secured and unsecured contingent payment obligations at June
30, 2020, including the lowest and highest undiscounted payout
scenarios as well as a weighted average payout scenario based on
relative undiscounted fair value of each cash flow
scenario.
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Secured Contingent
Payment Obligation
|
|
Unsecured
Contingent Payment Obligations
|
Unobservable
Inputs
|
|
Low
|
|
Weighted
Average
|
|
High
|
|
Low
|
|
Weighted
Average
|
|
High
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated
undiscounted cash outflows (in millions)
|
|
$0.0
|
|
$39.3
|
|
$58.5
|
|
$0.0
|
|
$4.8
|
|
$7.4
|
Duration (in
years)
|
|
1.0
|
|
2.4
|
|
3.0
|
|
1.0
|
|
2.4
|
|
3.0
|
Estimated
probabilities
|
|
0%
|
|
13%
|
|
30%
|
|
2%
|
|
22%
|
|
38%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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.
11. Legal
Proceedings
From time to time,
we are subject to legal proceedings and claims which arise in the
ordinary course of our business. These proceedings include patent
enforcement actions initiated by us against others for the
infringement of our technologies, as well as proceedings brought by
others against us at the Patent Trial and Appeal Board of the U.S.
Patent and Trademark Office (“PTAB”) and in the Federal
Patent Court in Germany in an attempt to invalidate certain of our
patent claims. We had several patent enforcement actions in
Germany, which has a “loser pay” system whereby the
non-prevailing party is responsible for statutory attorney fees and
costs. To the extent a loss is probable and reasonably estimable as
of the balance sheet date, the estimated loss is recorded in the
accompanying condensed consolidated statements of comprehensive
loss and included in current liabilities under the heading
“statutory court costs” in the condensed consolidated
balance sheets. As of June 30, 2020, and December 31, 2019, we have
accrued an aggregate of $0.33 million and $0.37 million,
respectively, in estimated statutory court costs for our cases in
Germany.
ParkerVision v. Qualcomm and
HTC (Middle District of Florida)
We have a patent
infringement complaint pending in the Middle District of Florida
against Qualcomm and Qualcomm Atheros, Inc. (collectively
“Qualcomm”), and HTC (HTC Corporation and HTC America,
Inc.) (the “Qualcomm Action”) seeking unspecified
damages and injunctive relief for infringement of certain of our
patents. The defendants have filed counterclaims against us for
non-infringement and invalidity for all patents in the case. The
case was filed in May 2014 and stayed in February 2016 pending
decisions in other cases, including the appeal of a PTAB proceeding
with regard to U.S. patent 6,091,940 (“the ‘940
Patent”) asserted in this case. In September 2018,
the Federal Circuit issued its decision with regard to the
‘940 Patent and, in January 2019, the court lifted the stay
in this case. In July 2019, the court issued an order
that granted our proposed selection of patent claims from four
asserted patents, including the ‘940 Patent, and denied
Qualcomm’s request to limit the claims and patents. The court
also agreed that we may elect to pursue accused products that were
at issue at the time the case was stayed, as well as new products
that were released by Qualcomm during the pendency of the
stay. In September 2019, Qualcomm filed a motion for
partial summary judgement in an attempt to exclude certain patents
from the case, including the ‘940 Patent. The
court denied this motion in January 2020. A claim
construction hearing was held in this case in August 2015, prior to
the stay, and a second claim construction hearing was held in
November 2019. In April 2020, the court issued its claim
construction order in which the court adopted our proposed
construction for seven of the ten disputed terms and adopted
slightly modified versions of our proposed construction for the
remaining terms. This case was scheduled for trial
beginning December 1, 2020; however, in March 2020, in response to
the impact of COVID-19, the court stayed all deadlines and
discovery responses in the case. In June 2020, the
court lifted the temporary stay and issued a new scheduling order
moving a number of deadlines, including a change in the trial
commencement date to May 3, 2021. Discovery and
depositions in this case are currently underway. The law firm
of McKool Smith is representing us in this case on a contingency
fee basis.
ParkerVision v. Apple and
Qualcomm (Middle District of Florida)
In December 2015,
we filed a patent infringement complaint in the Middle District of
Florida against Apple, LG, Samsung and Qualcomm alleging
infringement of four of our patents. In February 2016, the district
court proceedings were stayed pending resolution of a corresponding
case filed at the International Trade Commission
(“ITC”). In July 2016, we entered into a patent license
and settlement agreement with
Samsung and, as a
result, Samsung was dismissed from the district court action. In
March 2017, we filed a motion to terminate the ITC proceedings and
a corresponding motion to lift the stay in the district court case.
This motion was granted in May 2017. In July 2017, we filed a
motion to dismiss LG from the district court case (see ParkerVision
v. LG below). Also in July 2017, Qualcomm filed a motion
to change venue to the southern district of California, and Apple
filed a motion to dismiss for improper venue. In March 2018, the
district court ruled against the Qualcomm and Apple motions. The
parties also filed a joint motion in March 2018 to eliminate three
of the four patents in the case in order to expedite proceedings
leaving our U.S. patent 9,118,528 as the only remaining patent in
this case. A claim construction hearing was held on August 31,
2018. In July 2019, the court issued its claim construction order
in which the court adopted our proposed claim construction for two
of the six terms and the “plain and ordinary meaning”
on the remaining terms. In addition, the court denied a motion
filed by Apple for summary judgment. Fact discovery has
closed in this case and a jury trial was scheduled to begin in
August 2020. In March 2020, as a result of the
impact of COVID-19, the parties filed a motion requesting an
extension of certain deadlines in the case. In April 2020, the
court stayed this proceeding pending the outcome of ParkerVision v. Qualcomm
and HTC.
ParkerVision v. LG (District
of New Jersey)
In July 2017, we
filed a patent infringement complaint in the New Jersey against LG
for the alleged infringement of the same patents previously
asserted against LG in Florida (see ParkerVision v. Apple and
Qualcomm above). We elected to dismiss the case in
Florida and re-file in New Jersey as a result of a Supreme Court
ruling regarding proper venue. In March 2018, the court
stayed this case pending a final decision in ParkerVision v. Apple
and Qualcomm in the Middle District of Florida. As part of this
stay, LG has agreed to be bound by the final claim construction
decision in that case.
ParkerVision v. LG
Electronics (Munich, Germany)
In June 2016, we
filed a complaint in Munich District Court against LG Electronics
Deutschland GmbH, a German subsidiary of LG Electronics, Inc.
(“LGE”) seeking damages and injunctive relief for the
alleged infringement of the German part of our European patent 1
206 831 (“the ‘831 Patent”). In November 2016,
the court concluded that certain LGE products using Qualcomm RF
circuitry infringe our patent. The final decision in
this case was stayed pending resolution of the corresponding
nullity, or validity, action filed by Qualcomm in the German
Federal Patent Court in Munich (see Qualcomm v. ParkerVision
below). In October 2018, we received an unfavorable
decision in the nullity case. As a result, our infringement
complaint in this case was dismissed. As the
non-prevailing party, we are subject to claims for reimbursement of
statutory attorney’s fees and costs in this case which are
accrued in the accompanying condensed consolidated financial
statements as of June 30, 2020 and December 31, 2019. We
have posted a bond to cover this cost which is included in
“Prepaid expenses” in the accompanying condensed
consolidated balance sheets. In April 2020, the court fixed the
amounts due for statutory attorney’s fees and costs, and we
have requested a release of the bond funds which will fully cover
this cost.
Qualcomm v. ParkerVision
– Federal Patent Court in Germany (as appealed to the German
Supreme Court)
In August 2016,
Qualcomm filed a validity action in Federal Patent Court in Germany
against the ’831 Patent. The outcome of this validity action
impacts our German patent infringement cases against LGE and Apple
as discussed above. On October 17, 2018, following an oral hearing,
the court ruled that the ‘831 Patent was invalid.
In January 2019, we appealed this decision to the German
Supreme Court, but withdrew our appeal in July 2019. As the
non-prevailing party, we are subject to claims for reimbursement of
statutory fees and costs in this case, which are accrued in the
accompanying condensed consolidated financial statements as of June
30, 2020 and December 31, 2019.
ParkerVision v. Apple
(Munich, Germany) – the Apple II case
The Apple II case
sought damages and injunctive relief for the alleged infringement
of the German part of our European patent 1 135 853 (“the
‘853 Patent”). The court ruled in April 2019 that
Apple does not infringe our ‘853 Patent. We did not appeal
this decision. As the non-prevailing party, we are subject to
claims for reimbursement of statutory attorney’s fees and
costs in this case which we have accrued in the accompanying
condensed consolidated financial statements as of June 30, 2020 and
December 31, 2019. We have posted a bond to cover this cost which
is included in “Prepaid expenses” in the accompanying
condensed consolidated balance sheets.
Intel v. ParkerVision
(Federal Patent Court in Germany)
In August 2017,
Intel filed a nullity action in German Federal Patent Court
claiming invalidity of the ‘853 Patent that is the subject of
the Apple II case. In December 2019, following the adverse
decision in the Apple II case, we elected not to proceed with a
defense in this case. As the non-prevailing party, we are
subject to claims for reimbursement of statutory attorney fees and
costs in this case which we have accrued in the accompanying
condensed consolidated financial statements as of June 30, 2020 and
December 31, 2019.
ParkerVision v. Intel
(Western District of Texas)
In February 2020,
we filed a patent infringement complaint in the Western District of
Texas against Intel alleging infringement of eight of our patents.
The complaint was amended in May 2020 to add two additional
patents. In June 2020, we requested that one of the patents be
dropped from this case and filed a second case in the Western
District of Texas that included this dismissed patent (see
ParkerVision v.
Intel II below). Intel’s response to our
complaint was filed in June 2020 denying infringement and claiming
invalidity of the patents. Intel has also filed a motion
to transfer venue which has not yet been ruled on by the
court. The Markman, or claim construction hearing, is
currently scheduled for January 22, 2021 and the case is scheduled
for trial beginning February 7, 2022. The law
firm of Goldberg Segalla is representing us in this case on a
contingency fee basis.
ParkerVision v. Intel
II
(Western District
of Texas)
In June 2020, to
reduce the number of claims in ParkerVision v. Intel,
we filed a second patent infringement complaint in the
Western District of Texas against Intel that included a single
patent that was dismissed from the original
case. In July 2020, we amended our complaint
adding two more patents to the case. No dates have yet
been set in this case. The law firm of Goldberg
Segalla is representing us in this case on a contingency fee
basis.
ParkerVision v. TCL
Technology Group Corp (Central District of
California)
In May 2020, we
filed a patent infringement complaint against Technology Group
Corp, a Chinese company, and its U.S. subsidiary, TTE Technology,
Inc. (collectively “TCL”) in the Central District of
California alleging infringement of nine of our patents. TCL
products included in the action incorporate modules that contain
certain Wi-Fi chips manufactured by Realtek Semiconductor
Corporation, a Taiwanese IC provider. TCL’s response to
our complaint is due October 9, 2020. The law firm of
Goldberg Segalla is representing us in this case on a contingency
fee basis.
12. Stock Issuance
Stock and
Warrant Issuances – Equity Based
Financings
Private Placements with
Accredited Investors
In January 2020, we
entered into securities purchase agreements with accredited
investors for an aggregate of 1,169,232 shares of our common stock
at a price of $0.13 per share and 166,667 shares of our common
stock at $0.15 per share for aggregate proceeds of approximately
$0.2 million. In March
2020, we entered
into securities purchase agreements with accredited investors for
an aggregate of 2,571,432 shares of our common stock at a price of
$0.35 per share for aggregate proceeds of $0.9
million. The shares were registered for resale on a
registration statement that was declared effective on April 28,
2020 (File No. 333-237762).
The securities
purchase agreements for the March 2020 transaction were amended on
May 1, 2020, in order to add a contingent payment right
whereby we will pay each investor an allocated portion of our share
of proceeds from patent-related actions, after taking into account
fees and expenses payable to law firms representing the Company and
amounts payable to Brickell, up to an amount equal to the
investors’ aggregate subscription amount, or $0.9 million.
This amendment resulted in the recognition of $0.4 million
in expense to recognize the initial fair value of the contingent
payment right (see “unsecured contingent payment
obligations” in Note 9).
During the three
months ended June 30, 2020, we entered into securities purchase
agreements with accredited investors for an aggregate of 4,365,296
shares of our common stock at a price of $0.35 per share for
aggregate proceeds of $1.5 million. The securities purchase
agreements include contingent payment rights.
Approximately $0.7 million of the proceeds were allocated to
unsecured contingent payment obligations based on the initial fair
value estimate of the CPRs (see Note 9). We entered into
registration rights agreements with the investors pursuant to which
we will register the shares. We have committed to file the
registration statement by August 21, 2020 and to cause the
registration statement to become effective by the 150th
calendar day following the closing date. The registration rights
agreements provide for liquidated damages upon the occurrence of
certain events including failure by us to file the registration
statement or cause it to become effective by the deadlines set
forth above. The amount of the liquidated damages is 1.0% of the
aggregate subscription upon the occurrence of the event, and
monthly thereafter, up to a maximum of 6%, or approximately $0.1
million.
Warrant Amendment with Aspire
Capital
On February 28,
2020, we entered into a warrant amendment agreement (the
“Warrant Amendment Agreement”) with Aspire Capital
Fund, LLC (“Aspire”), with respect to warrants issued
in July and September 2018 (the “2018 Warrants”) that
are exercisable, collectively, into 5,000,000 shares of our common
stock. The Warrant Amendment Agreement provided
for a reduction in the exercise price for the 2018 Warrants from
$0.74 to $0.35 per share and the issuance of a new warrant for the
purchase of 5,000,000 shares of our common stock at an exercise
price of $0.74 per share (“New Aspire
Warrant”). The New Aspire Warrant expires
February 28, 2025 and is subject to adjustment in the event of
certain stock dividends and distributions, stock splits, stock
combinations, reclassifications or similar events affecting our
common stock and also upon any distributions of assets to our
stockholders. The New Aspire Warrant contains provisions
that prohibit exercise if the holder, together with its affiliates,
would beneficially own in excess of 9.99% of the number of shares
of common stock outstanding immediately after giving effect to such
exercise. The holder of the New Aspire Warrant may increase (up to
19.99%) or decrease this percentage by providing at least 61
days’ prior notice to the Company. In the event of certain
corporate transactions, the holder of the New Aspire Warrant will
be entitled to receive, upon exercise of such New Aspire Warrant,
the kind and amount of securities, cash or other property that the
holder would have received had they exercised the New Aspire
Warrant immediately prior to such transaction. The New Aspire
Warrant does not contain voting rights or any of the other rights
or privileges as a holder of our common stock.
The Warrant
Amendment Agreement added a call provision to the 2018 Warrants
whereby we may, after December 31, 2020, call for cancellation of
all or any portion of the 2018 Warrants for which an exercise
notice has not yet been received, in exchange for consideration
equal to $0.001 per warrant share and subject to certain
conditions, including the continued existence of an effective
registration statement for the underlying shares of common stock
and the availability of sufficient authorized shares to allow for
the
exercise of the
2018 Warrants. All other terms of the 2018 Warrants
remained unchanged, including the original expiration dates of July
and September 2023. In connection with the Warrant
Amendment Agreement, Aspire exercised 1,430,000 shares of the 2018
Warrants for aggregate proceeds to us of $0.5 million. An
additional 1,070,000 shares of the 2018 Warrants were exercised
during the three months ended June 30, 2020 for aggregate proceeds
to us of $0.38 million. We recognized $1.78 million of
non-cash warrant expense in connection with the Warrant Amendment
Agreement based on the difference between the Black-Scholes value
of the warrants immediately before and after the
amendment. The shares underlying the New Aspire Warrant
were registered for resale on a registration statement that was
declared effective on April 28, 2020 (File No.
333-237762). The shares underlying the 2018 Warrants are
currently registered for resale pursuant to a registration
statement on Form S-1 (File No. 333-226738).
Stock and Warrant Issuances
– Payment for Services
On February 10,
2020, we entered into a business consulting and retention agreement
with Chelsea Investor Relations (“Chelsea”) to provide
business advisory services to us. As consideration for
services to be provided under the 24-month term of the consulting
agreement, we issued 500,000 shares of unregistered common stock in
exchange for a nonrefundable retainer for services valued at
approximately $0.15 million. The value of the stock issued is
being recognized as consulting expense over the term of the
agreement. The shares were registered for resale on a registration
statement that was declared effective on April 28, 2020 (File No.
333-237762).
On March 16, 2020,
we entered into an agreement with Tailwinds Research Group LLC
(“Tailwinds”) to provide digital marketing services to
us. As consideration for services to be provided under
the twelve-month term of the agreement, we issued warrants for the
purchase up to 200,000 shares of our common stock with an exercise
price of $1.00 per share in exchange for a nonrefundable retainer
for services, valued using the Black-Scholes method, at
approximately $0.06 million. The value of the warrants
is being recognized to expense over the term of the
agreement. The Tailwinds warrants are exercisable immediately
after issuance, expire March 16, 2023, and are subject to
adjustment in the event of certain stock dividends and
distributions, stock splits, stock combinations, reclassifications
or similar events affecting our common stock. The shares
underlying the warrant were registered for resale on a registration
statement that was declared effective on April 28, 2020 (File No.
333-237762).
On June 8, 2020, we
entered into an agreement with a third party to provide media
advisory services. As consideration for services to be
provided under the term of the agreement, which extends through
December 31, 2020, we issued 30,000 shares of unregistered common
stock for a nonrefundable retainer for services valued at
approximately $0.01 million. The value of the stock
issued is being recognized as a consulting expense over the term of
the agreement. We are not obligated to register the
shares for resale.
Common Stock
Warrants
As of June 30,
2020, we had outstanding warrants for the purchase of up to 14.9
million shares of our common stock. The estimated grant
date fair value of these warrants of $2.3 million is included in
Additional Paid-in Capital in our condensed consolidated balance
sheets. As of June 30, 2020, our outstanding warrants
have an average exercise price of $0.43 per share and a weighted
average remaining life of approximately 3.4 years.
13. Share-Based
Compensation
There has been no
material change in the assumptions used to compute the fair value
of our equity awards, nor in the method used to account for
share-based compensation from those stated in our 2019 Annual
Report.
The following table
presents share-based compensation expense included in our condensed
consolidated statements of comprehensive loss for the three months
ended June 30, 2020 and 2019, respectively (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
Six Months
Ended
|
|
|
June 30,
|
|
June 30,
|
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
Research and
development expenses
|
|
$
|
-
|
|
$
|
-
|
|
$
|
-
|
|
$
|
5
|
Selling, general
and administrative expenses
|
|
|
303
|
|
|
48
|
|
|
764
|
|
|
110
|
Total share-based
compensation expense
|
|
$
|
303
|
|
$
|
48
|
|
$
|
764
|
|
$
|
115
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of June 30,
2020, there was $0.8 million of total unrecognized compensation
cost related to all non-vested share-based compensation
awards. The cost is expected to be recognized over a
weighted-average period of approximately 1 year.
On January 14,
2020, the Board granted nonqualified stock options to purchase
218,000 shares at an exercise price of $0.21 and
171,000 restricted shares awards (“RSAs”) to
former directors in settlement of approximately $0.3 million in
past Board and committee compensation fees. The options
and RSAs vest immediately upon grant and the options expire five
years from the grant date.
On
February 9, 2020, the Board approved awards under the
Company’s 2019 Long Term Incentive Plan (the “2019
Plan”) to executives and other key employees. The awards
included 675,000 restricted share units (“RSUs”) and
150,000 nonqualified stock options at an exercise price of $0.33
per share. Fifty percent (50%) of the RSUs vest on
May 9, 2020 and the remaining RSUs vest in four equal quarterly
installments commencing August 9, 2020. The options vest
50% upon grant with the remainder vesting in four equal quarterly
installments commencing May 10, 2020.
In addition, on
February 9, 2020, the Board approved equity awards to independent
directors under the 2019 Plan for the directors’ continued
waiver of all cash fees for board or committee
service. The awards included 150,000 RSUs and 300,000
nonqualified stock options at an exercise price of $0.33 per share.
The non-employee director awards vest 50% upon grant with the
remaining portion vesting in four equal quarterly installments
commencing May 9, 2020. The Board also awarded an
immediately vested option to purchase 100,000 shares at an exercise
price of $0.33 per share under the Company’s 2011 Long Term
Incentive Equity Plan to Robert Sterne in exchange for Mr.
Sterne’s waiver of approximately $0.1 million in accrued and
unpaid fees for board and committee service from 2016 to
2018. Each of the options awarded expire on February 9,
2027.
Non-Employee
Compensation
On June 7, 2020, we
extended our 2019 business consulting and retention agreement with
Mark Fisher to provide business advisory services to us through
2020. As consideration for services to be provided under
the 12-month term of the consulting agreement, we issued a
restricted stock award (RSA) of 20,000 shares of common
stock through the 2019 Long Term Incentive Plan in exchange
for a nonrefundable retainer for services valued at approximately
$0.01 million. The value of the shares issued was recognized
as share-based compensation at the time of issuance.
IT EM
2. Management’s Discussion and Analysis of
Financial Condition and Results of Operations
Forward-Looking
Statements
We believe that it
is important to communicate our future expectations to our
shareholders and to the public. This quarterly report
contains forward-looking statements, within the meaning of the
Private Securities Litigation Reform Act of 1995, including, in
particular, statements about our future plans, objectives, and
expectations contained in this Item. When used in this
quarterly report and in future filings by us with the Securities
and Exchange Commission (“SEC”), the words or phrases
“expects”, “will likely result”,
“will continue”, “is anticipated”,
“estimated” or similar expressions are intended to
identify “forward-looking
statements.” Readers are cautioned not to place
undue reliance on such forward-looking statements, each of which
speaks only as of the date made. Such statements are
subject to certain risks and uncertainties that could cause actual
results to differ materially from historical results and those
presently anticipated or projected, including the risks and
uncertainties identified in our annual report on Form 10-K for the
fiscal year ended December 31, 2019 (the “2019 Annual
Report”) and in this Item 2 of Part I of this quarterly
report. Examples of such risks and uncertainties include
general economic and business conditions, competition, unexpected
changes in technologies and technological advances, the timely
development and commercial acceptance of new products and
technologies, reliance on key suppliers, reliance on our
intellectual property, the outcome of our intellectual property
litigation and the ability to obtain adequate financing in the
future. We have no obligation to publicly release the
results of any revisions which may be made to any forward-looking
statements to reflect anticipated events or circumstances occurring
after the date of such statements.
Corporate
Website
We announce
investor information, including news and commentary about our
business, financial performance and related matters, SEC filings,
notices of investor events, and our press and earnings releases, in
the investor relations section of our website
(http://ir.parkervision.com). Additionally, if applicable, we
webcast our earnings calls and certain events we participate in or
host with members of the investment community in the investor
relations section of our website. Investors and
others can receive notifications of new information posted in the
investor relations section in real time by signing up for email
alerts and/or RSS feeds. Further corporate governance
information, including our governance guidelines, Board committee
charters, and code of conduct, is also available in the investor
relations section of our website under the heading “Corporate
Governance.” The content of our website is not
incorporated by reference into this Annual Report or in any other
report or document we file with the SEC, and any references to our
website are intended to be inactive textual references
only.
Overview
We have designed
and developed proprietary radio frequency (“RF”)
technologies and integrated circuits for use in wireless
communication products. We have expended significant financial and
other resources to research and develop our RF technologies and to
obtain patent protection for those technologies in the United
States of America (“U.S.”) and certain foreign
jurisdictions. We believe certain patents
protecting our proprietary technologies have been broadly
infringed by others and therefore the primary focus of our business
plan is the enforcement of our intellectual property rights through
patent infringement litigation and licensing efforts. We currently
have patent enforcement actions ongoing in various U.S. district
courts against providers of mobile handsets and smart televisions
and, in certain cases, their chip suppliers for the infringement of
several of our RF patents. We have made significant
investments in developing and protecting our technologies, the
returns on which are dependent upon the generation of future
revenues for realization.
Recent
Developments
Impact of
COVID-19
Many states,
including Florida, have been under a stay-at-home order since
mid-March 2020 in an effort to contain the spread of
COVID-19. While our employees currently have the ability
and are encouraged to work remotely, school closures and other
stay-at-home measures have an impact on employee productivity and
attendance and limit our ability to successfully sublease office
space that is not in use. In addition, we have
experienced delays in certain deadlines in our patent infringement
litigation as a result of court closures, travel bans and
stay-at-home measures in Florida as well as other states in which
we have ongoing litigation and states in which the defendants to
our patent infringement actions have personnel and
facilities. In addition, the current economic
environment as a result of COVID-19 makes access to debt and equity
capital more challenging.
In May 2020, we
received approximately $0.2 million in proceeds from an approved
loan under the Paycheck Protection Program. Interest
will accrue on outstanding principal balance at a rate of 1%,
computed on a simple interest basis. The loan principal
and accrued interest will be eligible for forgiveness provided that
(i) we use the loan proceeds exclusively for allowed costs
including payroll, employee group health benefits, rent and
utilities and (ii) employee and compensation levels are
maintained. We believe we will be eligible for
forgiveness of all, or a substantial portion of, the
loan. If the loan is not forgiven, we will be required
to make monthly repayments of approximately $8,000 per month
commencing November 1, 2020 and the loan will mature on May 3,
2022, at which time any unpaid principal and accrued interest will
be due and payable.
Legal
Proceedings
In April 2020, the
district court in the Middle District of Florida (Orlando division)
issued its claim construction order in Parkervision v. Qualcomm and
HTC whereby the court adopted the majority of our proposed
claim construction language for the disputed
terms. In June 2020, the court lifted the
temporary stay in place due to COVID-19 and discovery is
underway. The trial date in the case has been moved from
December 2020 to May 2021 as a result of the COVID-19
delays.
In addition, in
April 2020, the district court in the Middle District of Florida
(Jacksonville division) ruled to stay the ParkerVision v. Qualcomm and
Apple action pending the resolution of the case in the
Orlando division against Qualcomm and HTC. This case had originally
been scheduled for trial commencing in August 2020 but was under an
administrative stay due to the impact of COVID-19.
In 2020, we filed
two separate complaints against Intel in the Western District of
Texas alleging infringement of an aggregate of 12 of our
patents. We also filed an action against Chinese TCL
Technology Group Corp and its U.S. subsidiary TTE Technology, Inc.
(collectively “TCL”) in U.S. district court in the
Central District of California alleging infringement of nine of our
patents. The law firm of Goldberg Segalla is
representing us on a contingency fee basis in the Intel and TCL
cases.
Sale of Stock with Contingent
Payment Rights
From April to June
2020, we received an aggregate of $1.5 million from the sale of
equity securities with contingent payment rights. In
July, we received aggregate net proceeds of $0.2 million from
additional sales of equity securities with contingent payment
rights. The contingent payment rights entitle the
investors to an allocated portion of our share of proceeds from
patent-related actions, after taking into account fees and expenses
payable to law firms representing us and amounts payable to
Brickell.
Liquidity and Capital
Resources
We have incurred
significant losses from operations and negative operating cash
flows in every year since inception, largely as a result of our
significant investments in developing and protecting our
intellectual property, and have utilized the proceeds from sales of
debt and equity securities and contingent funding arrangements with
third-parties to fund our operations, including the cost of
litigation.
At June 30, 2020,
we had cash and cash equivalents of $0.5 million, a working capital
deficit of approximately $4.6 million, and an accumulated
deficit of approximately $413.3 million. These
circumstances raise substantial doubt about our ability to continue
to operate as a going concern within one year following the issue
date of our condensed consolidated financial
statements.
We used cash for
operations of approximately $3.0 million and $2.6 million
for the six months ended June 30, 2020 and 2019,
respectively. The increase in cash used for operations
from 2019 to 2020 is primarily due to increases in payments of
out-of-pocket expenses for ongoing litigation that were not covered
under existing contingent fee arrangements. For the six
months ended June 30, 2020, we received aggregate net proceeds from
the sale of debt and equity securities, including the exercise of
outstanding warrants, of approximately $4.7 million compared to
approximately $1.9 million in proceeds received for the six months
ended June 30, 2019. We repaid approximately $1.2
million and $0.8 million, respectively in debt obligations during
the six months ended June 30, 2020 and 2019. In
addition, we repaid approximately $0.7 million in short-term debt
and other accrued expenses with the use of shares of our common
stock during the six months ended June 30, 2020. Despite
our recent funding efforts, our resources are not sufficient to
meet our short-term liquidity needs and we will be required to seek
additional capital.
In July 2020, we
received aggregate proceeds from the sale of equity securities and
unsecured contingent payment rights of approximately $0.2
million. In addition, we are exploring additional
financing opportunities for both our short and long-term capital
needs. These financing opportunities may include debt,
convertible debt, common or preferred equity offerings, or a
combination thereof. There can be no assurance that we
will be able to consummate a financing transaction or that the
terms of such financing will be on terms and conditions that are
acceptable.
At June 30, 2020,
we had approximately $0.2 million in debt obligations to be paid
within twelve months, a decrease of $1.3 million in current debt
obligations at December 31, 2019. The decrease in our
short-term debt repayment obligations is primarily the result of
$1.2 million in repayments under secured and unsecured promissory
notes and $0.2 million in repayments of short-term notes with
shares of our common stock, somewhat offset by approximately $0.1
million increase in short-term repayment obligations from our
Paycheck Protection Program loan received in 2020.
Our ability to meet
our short-term liquidity needs, including our debt repayment
obligations, is dependent upon (i) our ability to successfully
negotiate licensing agreements and/or settlements relating to the
use of our technologies by others in excess of our contingent
payment obligations to Brickell, legal counsel, and other
investors; and (ii) our ability to raise additional capital from
the sale of debt or equity securities or other financing
arrangements.
Patent enforcement
litigation is costly and time-consuming and the outcome is
difficult to predict. We expect to continue to
invest in the support of our patent enforcement and licensing
programs. We expect that revenue generated from patent
enforcement actions and/or technology licenses in 2020, if any,
after deduction of payment obligations to Brickell, legal counsel,
and other investors, may not be sufficient to cover our operating
expenses. In the event we do not generate revenues, or
other patent-related proceeds, sufficient to cover our operational
costs and contingent repayment obligations, we will be required to
raise additional working capital through the sale of equity
securities or other financing arrangements.
The long-term
continuation of our business plan is dependent upon the generation
of sufficient revenues from our technologies and/or products to
offset expenses and contingent payment obligations. In
the event that we do not generate sufficient revenues, we will be
required to obtain additional funding through public or private
debt or equity financing or contingent fee arrangements and/or
reduce operating costs. Failure to generate sufficient
revenues, raise additional capital through debt or equity
financings or contingent fee arrangements, and/or reduce operating
costs will have a material adverse effect on our ability to meet
our long-term liquidity needs and achieve our intended long-term
business objectives.
Results of Operations
for Each of the Three Months Ended June 30, 2020 and
2019
Revenue and Gross
Margin
We reported no
licensing revenue for the three or six-month periods ended June 30,
2020 or 2019. Although we do anticipate licensing revenue
and/or settlement gains to result from our licensing and patent
enforcement actions, the amount and timing is highly unpredictable
and there can be no assurance that we will achieve our anticipated
results.
Due to our ceasing
the sales of Milo products in the fourth quarter of 2019, we
reported no product revenue for the three or six-month periods
ended June 30, 2020. We reported approximately $0.03 and
$0.04 million for the three and six-month periods ended June 30,
2019, from sales of our Milo-branded WiFi products.
Research and Development
Expenses
Subsequent to March
31, 2019, we halted substantially all research and development
efforts and, where applicable, repurposed prior engineering
resources to support our patent enforcement programs for our Milo
sales and support. Research and development expenses for the
six-month period ended June 30, 2019 consist primarily of
engineering and related management and support personnel costs;
software licensing and support costs, which represent the annual
licensing and support maintenance for engineering design and other
software tools; and an allocated portion of rent and other overhead
costs for our facilities. Personnel costs include
share-based compensation which represents the grant date fair value
of equity-based awards to our employees which is attributed to
expense over the service period of the award.
Our research and
development expenses decreased by approximately $0.3 million,
or 100.0%, during the six months ended June 30, 2020 when compared
to the same six-month period in 2019. The decrease is
primarily the result of $0.2 million in personnel and related costs
being repurposed for selling, general and administrative purposes,
including litigation support and Milo sales and support as well as
a $0.1 million reduction in research and development personnel
costs.
Selling, General, and
Administrative Expenses
Selling, general
and administrative expenses consist primarily of litigation fees
and expenses, personnel and related costs, including share-based
compensation, for executive, board, finance and accounting and
technical support for our patent enforcement program, and costs
incurred for insurance, outside accounting and legal professional
fees, shareholder relations and noncash expenses including
amortization and expense recognized in connection with contract
amendments.
Our selling,
general and administrative expenses increased by approximately
$0.5 million, or 26%, during the three months ended June 30,
2020 when compared to the same period in 2019. This is
primarily the result of the recognition of $0.4 million of expense
associated with an amendment to our March 2020 equity transactions,
a $0.3 million increase in share-based compensation, and impairment
of the right-of -use asset associated with the Lake Mary lease of
$0.2 million. These increases are partially offset by
decreases in litigation expenses, rent expense, amortization and
losses recognized upon abandonment of intangible assets of $0.1
million each.
Our selling,
general and administrative expenses increased by approximately $3.8
million, or 95%, during the six months ended June 30, 2020 when
compared to the same period in 2019. This is primarily due to a
$1.5 million increase in litigation expenses, a $0.6 million
increase in share-based compensation expense, recognition of $0.4
million of expense associated with an amendment to our March 2020
equity transactions, recognition of $1.8 million of expense
associated with amendments to warrant agreements, and impairment of
the right of use asset associated with our Lake Mary lease of $0.2
million. These increases are somewhat offset by
decreases in Board compensation of $0.3 million and decreases
in rent and amortization of $0.1 million each.
Litigation-related
fees and expenses were $0.3 million and $0.4 million for the three
months ended June 30, 2020 and 2019, respectively. This
decrease in litigation fees and expenses is primarily the result of
the conclusion of our German litigation actions in
2019. Litigation-related fees and expenses were $3.0
million and $1.5 million for the six months ended June 30, 2020 and
2019, respectively. This increase is primarily the
result of increased activity during the first quarter of 2020 for
the Middle District of Florida (Jacksonville division) case in
ParkerVision v.
Apple and Qualcomm for depositions
and expert reports, somewhat offset by a decrease in fees and
expenses related to our German actions.
During the three
and six months ended June 30, 2020, we incurred a noncash charge of
$0.4 million to recognize the estimated fair value of a contingent
payment right associated with a May 2020 amendment to our March
2020 equity transactions The contingent payment
right entitles each investor in the March 2020 equity transactions
to receive an allocated portion of our share of proceeds from
patent-related actions, after taking into account fees and expenses
payable to law firms representing us and amounts payable to
Brickell, up to an aggregate of $0.9 million.
During the six
months ended June 30, 2020, we also recognized a noncash charge of
$1.8 million to recognize the estimated fair value of a warrant
amendment agreement with Aspire Capital. Under the
amendment, we repriced 5 million existing warrants from $0.74 to
$0.35 and issued 5 million replacement warrants at
$0.74. The expense represents the increase in the
estimated fair value, using the Black-Scholes method, of the Aspire
warrants immediately before and after the amendment.
The increase in
share-based compensation for the three and six month periods is
primarily due to executive and Board equity awards granted in
August 2019 and the first quarter of 2020. This increase
is somewhat offset by a decrease in Board compensation expense due
to the settlement of previously accrued Board fees in exchange for
equity-based awards during the first quarter of 2020.
We recognized
impairment of the right-of-use asset associated with our Lake Mary
lease during the second quarter of 2020 based on a reduction in our
estimated future sublease income, largely as a result of the impact
of COVID-19. The decrease in rent expense for the
three and six months ended June 30, 2020 is due to a down-sizing of
our corporate headquarters in July 2019. The decrease in
amortization for the three and six months ended June 30, 2020 is
due to the expiration or disposal of a number of patents during
2019 and 2020.
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.
For the three and
six months ended June 30, 2020, we recorded an increase in the fair
value of our secured and unsecured contingent payment obligations
of approximately $1.1 million and $3.4 million, respectively,
compared to a decrease of approximately $0.4 million and $0.8
million for the same periods in 2019. 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. In addition, in 2020,
increases in fair value resulted from the sharp decrease in the
risk-free interest rate used in the calculation of discounted
projected future cash flows.
Off-Balance Sheet
Transactions, Arrangements and Other
Relationships
As of June 30,
2020, we had outstanding warrants to purchase approximately
14.9 million shares of our common stock. The
estimated grant date fair value of these warrants of approximately
$2.3 million is included in shareholders’ deficit in our
condensed consolidated balance sheets. The outstanding
warrants have a weighted average exercise price of $0.43 per share
and a weighted average remaining life of approximately 3.4
years.
Critical Accounting
Policies
There have been no
changes in accounting policies from those stated in our 2019 Annual
Report. We do not expect any newly effective accounting
standards to have a material impact on our financial position,
results of operations or cash flows when they become
effective.
IT EM 3. Quantitative
and Qualitative Disclosures About Market
Risk.
Not
applicable.
ITE M 4. Controls and
Procedures.
Evaluation of
Disclosure Controls and Procedures
As of June 30,
2020, our management, with the participation of our Chief Executive
Officer and Chief Financial Officer, evaluated the effectiveness of
our “disclosure controls and procedures,” as defined in
Rule 13a-15(e) and 15d-15(e) under the Securities and Exchange Act
of 1934, as amended (the “Exchange
Act”). Based upon this evaluation, our Chief
Executive Officer and Chief Financial Officer concluded that these
disclosure controls and procedures were effective as of June 30,
2020.
Changes in Internal
Control Over Financial Reporting
There have been no
changes in our internal control over financial reporting identified
in connection with the evaluation required by Rule 13a-15(d) under
the Exchange Act that occurred during the last fiscal quarter that
have materially affected, or are reasonably likely to materially
affect, our internal control over financial reporting.
PA RT II - OTHER
INFORMATION
ITEM 1. Legal
Proceedings.
Reference is made
to the section entitled “Legal Proceedings” in Note 11
to our unaudited condensed consolidated financial statements
included in this quarterly report for a discussion of current legal
proceedings, which discussion is incorporated herein by
reference.
There have been no
material changes from the risk factors disclosed in Item 1A of Part
I of our Annual Report. In addition to the information
in this quarterly report, the risk factors disclosed in our Annual
Report should be carefully considered in evaluating our business
because such factors may have a significant impact on our business,
operating results, liquidity and financial condition.
I TEM 2. Unregistered
Sales of Equity Securities and Use of Proceeds.
In June 2020, we
issued 30,000 shares of our common stock as payment of a retainer
valued at approximately $14,000 for services provided under a
consulting agreement with a third-party. The shares
issued were exempt from registration under Section 4(a)(2) of the
Securities Act. We are not obligated to register the
shares for resale under the terms of the agreement.
IT EM 3. Defaults Upon
Senior Securities.
We have a note in
the principal amount of $0.02 million payable to Mintz, Levin,
Cohn, Ferris, Glovsky and Popeo, P.C. (“Mintz”)
for outstanding, unpaid attorney’s fees and costs associated
with our patent enforcement program. We have been in
payment default on the note since November 17, 2019, and
accordingly, have accrued interest at the default rate of 12% per
annum. Currently, Mintz has not requested acceleration of unpaid
principal and interest on the note, nor have they waived the
outstanding default. During the six months ended June 30, 2020, we
made payments to Mintz of $1.2 million which we applied to
outstanding principal and interest on the Mintz note, leaving an
outstanding balance at June 30, 2020 of approximately $0.02
million. Mintz disputes our application of payments against
principal and interest on the note rather than against the $3.1
million in outstanding billed and unpaid fees and expenses payable
to Mintz that are included in our accounts payable at June 30,
2020. We are in active discussions with Mintz to resolve
our outstanding fee dispute. Our total arrearage on the
secured note as of August 14, 2020 is $0.02 million which includes
default interest.
IT EM 4. Mine Safety
Disclosures.
Not
applicable.
IT EM 5. Other
Information.
None.
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Exhibit
Number
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Description of Exhibit
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10.1
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10.2
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10.3
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10.4
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10.5
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10.6
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10.7
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10.8
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10.9
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10.10
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10.11
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10.12
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10.13
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31.1
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31.2
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32.1
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101.INS
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XBRL Instance
Document*
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101.SCH
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XBRL Taxonomy
Extension Schema*
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101.CAL
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XBRL Taxonomy
Extension Calculation Linkbase*
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101.DEF
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XBRL Taxonomy
Extension Definition Linkbase*
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101.LAB
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XBRL Taxonomy
Extension Label Linkbase*
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101.PRE
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XBRL Taxonomy
Extension Presentation Linkbase*
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*Filed
herewith
Pursuant to the
requirements of the Securities Exchange Act of 1934, the registrant
has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
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ParkerVision, Inc.
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Registrant
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August 14,
2020
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By:
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/s/Jeffrey L. Parker
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Jeffrey L. Parker
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Chairman and Chief Executive Officer
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(Principal Executive Officer)
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August 14,
2020
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By:
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/s/Cynthia L. Poehlman
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Cynthia L. Poehlman
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Chief Financial Officer
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(Principal Financial Officer and Principal
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Accounting Officer)
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29