PRKR August 2019 S-1
As filed with the Securities and Exchange Commission on August 21,
2019
Registration No. 333-_______
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
__________
FORM S-1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF
1933
__________
PARKERVISION,
INC.
(Exact
name of registrant as specified in its charter)
__________
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Florida
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3663
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59-2971472
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(State
or Other Jurisdiction of Incorporation)
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(Primary
Standard Industrial Classification Code Number)
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(IRS
Employer Identification No.)
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9446 Philips Highway, Suite 5A
Jacksonville, Florida 32256
Phone: (904) 732-6100
(Address,
including zip code, and telephone number, including area code, of
registrant’s principal executive offices)
__________
Jeffrey Parker, Chairman of the Board
ParkerVision, Inc.
9446 Philips Highway, Suite 5A
Jacksonville, Florida 32256
(904) 732-6100
(Name,
address and telephone number, including area code, of agent for
service)
__________
with a copy to:
David Alan Miller, Esq.
Graubard Miller
The Chrysler Building
405 Lexington Avenue - 11th floor
New York, NY 10174-1901
__________
Approximate
date of commencement of proposed sale to the public: As soon as possible after the Registration
Statement is declared effective.
If any
of the securities being registered on this Form are to be offered
on a delayed or continued basis pursuant to Rule 415 under the
Securities Act of 1933 check the following box:
☒
If this
form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the
following box and list the Securities Act registration statement
number of the earlier effective registration statement for the same
offering. ☐
If this
form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the
Securities Act registration number of the earlier effective
registration statement for the same offering. ☐
If this
form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the
Securities Act registration number of the earlier effective
registration statement for the same offering. ☐
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated filer, a
smaller reporting company or an emerging growth company. See the
definitions of “large accelerated filer,”
“accelerated filer,” “smaller reporting
company,” and "emerging growth company" in Rule 12b-2 of the
Exchange Act.
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Large
accelerated filer ☐
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Accelerated
filer ☐
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Non-accelerated
filer ☒
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Smaller
reporting company ☒
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Emerging
growth company ☐
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If an
emerging growth company, indicate by check mark if the registrant
has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided
pursuant to Section 7(a)(2)(B) of the Securities Act.
☐
CALCULATION OF REGISTRATION FEE
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Title
of Securities to be Registered
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Amount
to be Registered (7)
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Proposed
Maximum Offering Price Per Share (8)
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Proposed
Maximum Aggregate Offering Price
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Amount
of Registration Fee
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Common
Stock, par value $0.01 per share
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3,900,000
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(1)
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$0.175
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$682,500
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$
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82.72
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Common
Stock, par value $0.01 per share
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1,557,583
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(2)
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$0.175
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$272,577
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$
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33.04
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Common
Stock, par value $0.01 per share
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8,750,000
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(3)
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$0.175
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$1,531,250
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$
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185.58
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Common
Stock, par value $0.01 per share
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1,381,581
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(4)
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$0.175
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$241,777
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$
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29.30
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Common
Stock, par value $0.01 per share
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625,000
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(5)
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$0.175
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$109,375
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$
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13.26
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Common
Stock, par value $0.01 per share
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1,800,000
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(6)
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$0.175
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$315,000
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$
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38.18
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Total
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18,014,164
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$3,152,479
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$
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382.08
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(1)
Represents shares
of common stock, par value $0.01 per share (“Common
Stock”) issuable pursuant to convertible promissory notes
dated June 7, 2019 through July 15, 2019 at a fixed conversion
price of $0.10 per share (the “Tranche 1
Notes”).
(2)
Represents shares
of Common Stock that are issuable pursuant to any elections made by
us to pay interest in shares of Common Stock on the Tranche 1
Notes, and assumes that each interest payment made through maturity
will be paid in shares of Common Stock. The interest is payable at
a rate of 8% of the outstanding principal balance per annum and
interest payments will be made quarterly beginning on the earlier
of (i) ninety (90) days following the issue date of the Tranche 1
Notes provided a registration statement covering the shares of
Common Stock has been declared effective or (ii) the first
quarterly anniversary date following the effectiveness of a
registration statement covering the shares of Common Stock. The
price of the shares, if interest is paid in shares of Common Stock,
will be determined based on the closing price of the Common Stock
immediately prior to the interest payment date. For purposes of
this Registration Statement, we have estimated this number based on
the maximum interest payment amount divided by the closing price of
our Common Stock on the OTCQB Venture Market (the
“OTCQB”) on the date prior to the closing date of each
note, or a weighted average price of $0.10 per share.
(3)
Represents shares
of Common Stock issuable pursuant to convertible promissory notes
dated July 18, 2019 at a fixed conversion price of $0.08 per share
(the “Tranche 2 Notes”).
(4)
Represents shares
of Common Stock that are issuable pursuant to any elections made by
us to pay interest in shares of Common Stock on the Tranche 2
Notes, and assumes that each interest payment made through maturity
will be paid in shares of Common Stock. The interest is payable at
a rate of 7.5% of the outstanding principal balance per annum and
interest payments will be made quarterly beginning on the earlier
of (i) ninety (90) days following the issue date of the Tranche 2
Notes provided a registration statement covering the shares of
Common Stock has been declared effective or (ii) the first
quarterly anniversary date following the effectiveness of a
registration statement covering the shares of Common Stock. The
price of the shares, if interest is paid in shares of Common Stock,
will be determined based on the closing price of the Common Stock
immediately prior to the interest payment date. For purposes of
this Registration Statement, we have estimated this number based on
the maximum interest payment amount divided by the closing price of
our Common Stock on the OTCQB on the date prior to the closing date
of the Tranche 2 Notes, or $0.19 per share.
(5)
Represents shares
of Common Stock issued as payment for services in conjunction with
a consulting agreement dated June 7, 2019 (the “Fisher
Consulting Agreement”).
(6)
Represents shares
of Common Stock issuable upon exercise of a five-year warrant with
an exercise price of $0.10 per share, subject to adjustment and
issued as payment for services in conjunction with a consulting
agreement dated July 22, 2019 (the “Park Consulting
Warrant”).
(7)
Pursuant to Rule
416(a) of the Securities Act of 1933, as amended (the
“Securities Act”), this Registration Statement also
covers any additional shares of Common Stock which may become
issuable to prevent dilution from stock splits, stock dividends and
similar events.
(8)
Pursuant to Rule
457(c) of the Securities Act, this amount represents the average of
the high and low prices of our Common Stock as reported on the
OTCQB on August 16, 2019.
__________
The registrant hereby amends this Registration Statement on Form
S-1 on such date or dates as may be necessary to delay its
effective date until the registrant shall file a further amendment
which specifically states that this registration statement shall
thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the registration statement shall
become effective on such date as the Securities and Exchange
Commission, acting pursuant to said Section 8(a), may
determine.
The
information in this preliminary prospectus is not complete and may
be changed. We may not sell these securities until the registration
statement filed with the Securities and Exchange Commission is
effective. This prospectus is not an offer to sell these securities
and is not soliciting an offer to buy these securities in any state
where the offer or sale is not permitted.
SUBJECT TO COMPLETION, DATED AUGUST 21, 2019
PROSPECTUS
PARKERVISION, INC.
18,014,164 Shares of Common Stock
This
prospectus relates to the resale by the selling stockholders listed
under the heading “Selling
Stockholders” of up to 18,014,164 shares of our common
stock, par value $0.01 per share (“Common Stock”)
consisting of (i) up to 5,457,583 shares of Common Stock issuable
upon conversion of, and for the payment of interest from time to
time at our option, for convertible promissory notes dated June 7,
2019 through July 15, 2019 which have a fixed conversion price of
$0.10 per share (the “Tranche 1 Notes”), (ii) up to
10,131,581 shares of Common Stock issuable upon conversion of, and
for the payment of interest from time to time at our option, for
convertible promissory notes dated July 18, 2019 which have a fixed
conversion price of $0.08 per share (the “Tranche 2
Notes”), (iii) up to 625,000 shares of Common Stock issued as
payment for services in conjunction with a consulting agreement
dated June 7, 2019 (the “Fisher Consulting Agreement”)
and (iv) up to 1,800,000 shares of Common Stock issuable upon
exercise of a five-year warrant with an exercise price of $0.10 per
share, subject to adjustment and issued as payment for services in
conjunction with a consulting agreement dated July 22, 2019 (the
“Park Consulting Warrant”).
We are
registering these shares of Common Stock as required by the terms
of registration rights agreements between the selling stockholders
and us. The registration of the shares of Common Stock offered by
this prospectus does not mean that the selling stockholders will
offer or sell any of these shares. The selling stockholders may
offer the shares of Common Stock at prevailing market prices at the
time of sale, at prices related to the prevailing market price, at
varying prices determined at the time of sale, or at negotiated
prices. See “Plan of
Distribution” on page 39 for additional
information.
We will
not receive proceeds from the sale of the shares of Common Stock by
the selling stockholders. To the extent the Park Consulting Warrant
is exercised for cash, we will receive up to an aggregate of
$180,000 in gross proceeds. We expect to use proceeds received from
the exercise of the Park Consulting Warrant, if any, for general
working capital and corporate purposes.
The
selling stockholders may be deemed to be “underwriters”
within the meaning of the Securities Act. We will pay the expenses
of registering these shares of Common Stock, but all selling and
other expenses incurred by the selling stockholders will be paid by
the selling stockholders.
Our
Common Stock is listed on the OTCQB Venture Capital Market under
the ticker symbol “PRKR.”
You should read this prospectus and any prospectus supplement
carefully before you invest in any of our securities.
Investing in our securities involves a high degree of risk. See
“Risk Factors”
beginning on page 5 of this prospectus for a discussion of
information that should be considered in connection with an
investment in our securities.
Neither the Securities and Exchange Commission nor any such
authority has approved or disapproved these securities or
determined whether this prospectus is truthful or complete. Any
representation to the contrary is a criminal offense.
The
date of this prospectus is _____________, 2019.
TABLE OF CONTENTS
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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
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2
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PROSPECTUS SUMMARY
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3
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RISK FACTORS
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5
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USE OF PROCEEDS
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12
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THE PRIVATE PLACEMENTS
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13
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MARKET PRICE OF OUR COMMON STOCK AND RELATED STOCKHOLDER
MATTERS
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14
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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
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15
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DESCRIPTION OF BUSINESS
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26
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DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
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30
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EXECUTIVE COMPENSATION
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32
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL HOLDERS
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35
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
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36
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SELLING STOCKHOLDERS
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37
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PLAN OF DISTRIBUTION
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39
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DESCRIPTION OF SECURITIES
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41
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LEGAL MATTERS
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42
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EXPERTS
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42
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WHERE YOU CAN FIND MORE INFORMATION
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42
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INDEX TO FINANCIAL STATEMENTS
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F-1
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We have not, and the selling stockholders have not, authorized
anyone to provide you with information different from that
contained in this prospectus or in any supplement to this
prospectus or free writing prospectus, and neither we nor the
selling stockholders take any responsibility for any other
information that others may give you. This prospectus is not an
offer to sell, nor is it a solicitation of an offer to buy, the
securities in any jurisdiction where the offer or sale is not
permitted. You should not assume that the information contained in
this prospectus or any prospectus supplement or free writing
prospectus is accurate as of any date other than the date on the
front cover of those documents, regardless of the time of delivery
of this prospectus or any sale of a security. Our business,
financial condition, results of operations and prospects may have
changed since those dates.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Some of
the statements in this prospectus are forward-looking statements
that involve risks and uncertainties. These forward-looking
statements include statements about our plans, objectives,
expectations, intentions and assumptions, and all other statements
that are not statements of historical fact. You can identify these
statements by words such as “may,” “will,”
should,” “estimates,” “plans,”
“expects,” “believes,”
“intends” and similar expressions. We cannot guarantee
future results, levels of activity, performance or achievements.
Our actual results and the timing of certain events may differ
significantly from the results discussed in the forward-looking
statements. Factors that might cause such a discrepancy include
those discussed in “Our
Company,” “Risk
Factors,” and elsewhere in this prospectus and any
prospectus supplements. You are cautioned not to place undue
reliance on any forward-looking statements. We are under no duty to
update or revise any of the forward-looking statements or risk
factors to conform them to actual results or to changes in our
expectations.
PROSPECTUS SUMMARY
This summary highlights certain selected information about us, this
offering and the securities offered hereby. This summary is not
complete and does not contain all of the information that you
should consider before deciding whether to invest in our Common
Stock. For a more complete understanding of our Company and this
offering, we encourage you to read the entire prospectus, including
the information presented under the section entitled “Risk
Factors” and the financial data and related notes. Unless we
specify otherwise, all references in this prospectus to
“ParkerVision,” “we,” “our,”
“us,” and “our company,” refer to
ParkerVision, Inc. and its wholly-owned German subsidiary,
ParkerVision GmbH.
Our Company
We were
incorporated under the laws of the state of Florida on
August 22, 1989. We are in the business of innovating
fundamental wireless technologies and products. We have designed
and developed proprietary radio frequency (“RF”)
technologies and integrated circuits for use in wireless
communication products. We have expended significant financial and
other resources to research and develop our RF technologies and to
obtain patent protection for those technologies in the United
States of America (“U.S.”) and certain foreign
jurisdictions. We believe certain patents protecting our
proprietary technologies have been broadly infringed by others and
therefore our business plan includes enforcement of our
intellectual property rights through patent infringement litigation
and licensing efforts.
We have
also designed and developed a consumer distributed WiFi product
line that is marketed under the brand name Milo®. We expect to sell or otherwise exit the Milo
product operations in 2019 and intend to focus our resources solely
on licensing and enforcement of our wireless technologies.
During the second quarter of 2019, we ceased all research and
development efforts and, where applicable, repurposed resources to
support our patent enforcement and Milo sales and support
efforts.
Our
business address is 9446 Philips Highway, Suite 5A, Jacksonville,
Florida 32256 and our telephone number is (904) 732-6100. We
maintain a website at www.parkervision.com.
We have not incorporated by reference into this prospectus the
information on our website, and you should not consider it to be a
part of this prospectus.
Background of the Offering
Convertible Notes Transactions
From
June 7, 2019 through July 15, 2019, we sold an aggregate of
$390,000 in convertible notes to accredited investors (the
“Tranche 1 Notes”). The Tranche 1 Notes mature five
years from the date of issuance and are convertible, at the
holders’ option, into shares of our Common Stock at a fixed
conversion price of $0.10 per share. The Tranche 1 Notes bear
interest at a stated rate of 8% per annum. Interest is payable
quarterly, and we may elect, subject to certain equity conditions,
to pay interest in cash, shares of our Common Stock, or a
combination thereof.
On July
18, 2019, we sold an aggregate of $700,000 in convertible notes to
accredited investors (the “Tranche 2 Notes). The Tranche 2
Notes mature five years from the date of issuance and are
convertible, at the holders’ option, into shares of our
Common Stock at a fixed conversion price of $0.08 per share. The
Tranche 2 Notes bear interest at a stated rate of 7.5% per annum.
Interest is payable quarterly, and we may elect, subject to certain
equity conditions, to pay interest in cash, shares of our Common
Stock, or a combination thereof.
Consulting Agreements
On June
7, 2019, we entered into a consulting agreement with Mark Fisher
(“Fisher”) to act as special advisor to our chief
executive officer with regard to our future business strategies. As
consideration for services to be provided under the six-month term
of the consulting agreement, we issued 625,000 shares of
unregistered Common Stock in exchange for a nonrefundable retainer
for services over the six-month term of the agreement valued at
approximately $60,000.
On July
22, 2019, we entered into a consulting agreement with Park
Consultants LLC to act as special advisor to our chief executive
officer with regard to our future business strategies. As
consideration for services to be provided under the eighteen-month
term of the consulting agreement, we issued a warrant to purchase
up to 1,800,000 shares of our Common Stock with an exercise price
of $0.10 per share (the “Park Consulting Warrant”) in
exchange for a nonrefundable retainer for services. The Park
Consulting Warrant is exercisable immediately after issuance and
expires five years following the issuance date.
The Offering
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Common Stock being offered by the selling stockholders (1)
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18,014,164
shares including (i) 15,589,164 shares issuable upon conversion of,
and for the payment of interest from time to time at our option
for, the Tranche 1 and Tranche 2 Notes (collectively, the
“Notes”), (ii) 625,000 shares issued as payment for
services in conjunction with a consulting agreement dated June 7,
2019, and (iii) 1,800,000 shares issuable upon exercise of a
five-year warrant with an exercise price of $0.10 per share,
subject to adjustment and issued as payment for services in
conjunction with a consulting agreement dated July 22,
2019.
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Common Stock outstanding prior to the Offering
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31,730,872
shares as of August 15, 2019 (2)
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Common Stock outstanding after the Offering
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49,120,036
(3)
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Terms of Offering
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The
selling stockholders will determine when and how they will sell the
Common Stock offered hereby, as described in “Plan of Distribution” beginning
on page 39.
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Use of proceeds
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The
selling stockholders will receive all of the proceeds from the sale
of the shares offered under this prospectus. We will not receive
proceeds from the sale of the shares by the selling stockholders.
However, to the extent the Park Consulting Warrant is exercised for
cash, we will receive up to an aggregate of $180,000 in gross
proceeds. We expect to use the proceeds from the exercise of the
Park Consulting Warrant, if any, for working capital and corporate
purposes.
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OTCQB Symbol
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PRKR
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Risk Factors
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Investing
in our securities involves a high degree of risk. You should
carefully review and consider the “Risk Factors” section of this
prospectus for a discussion of factors to consider before deciding
to invest in shares of our Common Stock.
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(1)
Assumes conversion
of the Notes in full at their respective maturity dates at the
fixed conversion price per share, and assumes that interest paid
through maturity will be paid in shares of Common Stock at an
average price per share of $0.14.
(2)
This amount does
not include:
●
options for the
purchase of up to 11.38 million additional shares of Common Stock,
including 10.55 million options granted on August 7, 2019 under the
2019 Long-Term Incentive Plan that will not be exercisable, unless
and until we have sufficient authorized unissued shares or treasury
shares available for such exercise.
●
warrants to
purchase up to 12.15 million additional shares of Common Stock,
including the 1.8 million shares of Common Stock issuable upon
exercise of the Park Consulting Warrant registered
hereby;
●
pre-funded warrants
to purchase up to 1.35 million additional shares of Common
Stock;
●
up to 20.3 million
shares of Common Stock issuable upon the conversion of the
outstanding principal amount of our convertible promissory notes,
including the shares underlying the principal amounts of Tranche 1
and Tranche 2 Notes registered hereby;
●
up to an estimated
8.2 million additional shares of Common Stock issuable upon the
payment in shares of interest on outstanding convertible promissory
notes, including the estimated interest shares for the Tranche 1
and Tranche 2 Notes registered hereby;
●
2.1 million shares
of Common stock that have been reserved for issuance in connection
with future grants, subject to authorization of sufficient shares
by our stockholders.
(3)
This amount
includes the estimated 15,589,164 shares issuable upon conversion
of, and for the payment of interest from time to time at our option
on, the Tranche 1 and Tranche 2 Notes and all 1,800,000 shares
issuable upon exercise of the Park Consulting Warrant.
RISK FACTORS
You should carefully consider the risks and uncertainties described
below. The risks and uncertainties described below are not the only
ones facing us. Additional risks not presently known to us or that
we currently believe are immaterial may also impair our business
operations. Our business, financial condition or results of
operation could be materially adversely affected by any of these
risks. The trading price of our Common Stock could decline because
of any one of these risks, and you may lose all or part of your
investment.
Financial and Operating Risks
Our financial condition raises substantial doubt as to our ability
to continue as a going concern.
We have
had significant losses and negative cash flows in every year since
inception, and continue to have an accumulated deficit which, at
June 30, 2019, was approximately $396.0 million. Our net losses for
the six months ended June 30, 2019 and for the year ended December
31, 2018 were approximately $3.7 million and $20.9 million,
respectively. In conjunction with the issuance of our interim
condensed consolidated financial statements for the period ended
June 30, 2019, we were required to evaluate our ability to continue
as a going concern. Note 2 to the interim condensed consolidated
financial statements included in our Quarterly Report on Form 10-Q
for the period ended June 30, 2019 includes a discussion regarding
our liquidity and our conclusion that there is substantial doubt
about our ability to continue as a going concern. Additionally, our
independent registered public accounting firm that audited our
consolidated financial statements for the year ended December 31,
2018 included in their audit report a statement indicating
substantial doubt regarding our ability to continue as a going
concern. Our consolidated financial statements have been prepared
assuming we will continue to operate as a going concern, which
contemplates the realization of assets and the satisfaction of
liabilities in the normal course of business. If we become unable
to continue as a going concern, we may have to liquidate our assets
and the values we receive for our assets in liquidation or
dissolution could be significantly lower than the values reflected
in our consolidated financial statements. The substantial doubt as
to our ability to continue as a going concern may adversely affect
our ability to negotiate reasonable terms with our vendors and may
adversely affect our ability to raise additional capital in the
future.
We have had a history of losses which may ultimately compromise our
ability to implement our business plan and continue in
operation.
To
date, our technologies and products have not produced revenues
sufficient to cover our operating costs. We will continue to make
expenditures on patent protection and enforcement and general
operations in order to secure and fulfill any contracts that we
achieve for the sale of our products or technologies. Without a
successful financial outcome from our current patent enforcement
efforts, our revenues in 2019 will not bring us to profitability
and our current capital resources will not be sufficient to sustain
our operations through 2019. If we are not able to generate
sufficient revenues or obtain sufficient capital resources, we will
not be able to implement our business plan or meet our current obligations due within the
twelve months after the issuance date of our consolidated financial
statements and investors will suffer a loss in their
investment. This may also result in a change in our business
strategies.
We will need to raise substantial additional capital in the future
to fund our operations. Failure to raise such additional capital
may prevent us from implementing our business plan as currently
formulated.
Because
we have had net losses and, to date, have not generated positive
cash flow from operations, we have funded our operating losses
primarily from the sale of debt and equity securities, including
our secured contingent debt obligation. Our capital resources
include cash and cash equivalents of $0.1 million at June 30,
2019. In addition, we received proceeds of $0.75 million in July
2019 from the sale of convertible notes. Although we implemented significant cost reduction
measures in August 2018, our business plan will continue to require
expenditures for patent protection and enforcement and general
operations. For the six months ended June 30, 2019 and the year
ended December 31, 2018, we used $2.6 million and $10.3
million, respectively in cash for operations which was funded
primarily through the sale of debt and equity securities. Our
current capital resources will not be sufficient to meet our
working capital needs for the twelve months after the issuance of
our consolidated financial statements and we will require
additional capital to fund our operations. Additional capital may
be in the form of debt securities, the sale of equity securities,
including common or preferred stock, additional litigation funding,
or a combination thereof. Failure to raise additional capital will
have a material adverse impact on our ability to achieve our
business objectives.
If we are unsuccessful in executing our cost reduction measures,
our business and results of operations may be adversely
affected.
In
August 2018, we implemented cost reduction measures in order to
focus our limited resources on our patent enforcement program.
These cost reduction measures included a significant reduction in
our workforce, a reduction in executive management salaries, the
closure of our engineering design center in Lake Mary, Florida,
cessation of our chip development activities, and significant
curtailment of sales and marketing expenditures for our WiFi
products. We expect these cost reduction measures to be fully
captured by the end of 2019, and we estimate that we will recognize
annualized savings of approximately $9 million. However, we cannot
provide assurance that our anticipated cost savings will be fully
realized or that business and financial results will improve. Our
ability to achieve the anticipated costs savings and other benefits
is subject to economic, competitive and other uncertainties, some
of which are beyond our control. We may experience delays in the
timing of certain cost reduction efforts or unanticipated costs in
implementing them. Moreover, changes in the size, alignment or
organization of our workforce could adversely affect employee
morale and retention, relations with customers, vendors and
business partners, and impair our ability to realize our current or
future business and financial objectives. If we do not succeed in
our cost reduction efforts, if these efforts are more costly or
time-consuming than anticipated, if we experience delays or if
other unforeseen events occur, our business and results of
operations may be adversely affected.
Raising additional capital by issuing debt securities or additional
equity securities may result in dilution and/or impose covenants or
restrictions that create operational limitations or other
obligations.
We will
require additional capital to fund our operations and meet our
current obligations due within the twelve months after the issuance
date of our consolidated financial statements. Financing, if any,
may be in the form of debt or sales of equity securities, including
common or preferred stock. Debt instruments or the sale of
preferred stock may result in the imposition of operational
limitations and other covenants and payment obligations, any of
which may be burdensome to us and may have a material adverse
impact on our ability to implement our business plan as currently
formulated. The sale of equity securities, including common or
preferred stock, may result in dilution to the current
stockholders’ ownership and may be limited by the number of
shares we have authorized and available for issuance.
We may be obligated to repay outstanding notes at a premium upon
the occurrence of an event of default.
We have $2.7 million in secured and unsecured notes payable and
$2.8 million in outstanding principal under convertible notes
payable at June 30, 2019 and we have an additional
$0.75 million in outstanding principal under convertible notes
issued in July 2019. If we fail to comply with the various
covenants set forth in each of the notes, including failure to pay
principal or interest when due or, under certain notes,
consummating a change in control, we could be in default
thereunder. Upon an event of default under each of the notes, the
interest rate of the notes will increase to 12% per annum (or 20%
per annum in the case of short-term notes dated June and July 2019)
and the outstanding principal balance of the notes plus all accrued
unpaid interest may be declared immediately payable by the holders.
We may not have sufficient available funds to repay the notes upon
an event of default, and we cannot provide assurances that we will
be able to obtain other financing at terms acceptable to us, or at
all.
Our ability to utilize our tax benefits could be substantially
limited if we fail to generate sufficient income or if we
experience an “ownership change.”
We have
cumulative net operating loss carryforwards (“NOLs”)
totaling approximately $336.4 million at December 31,
2018, of which $323.5 million is subject to expiration in varying
amounts from 2019 to 2036. Our ability to fully recognize the
benefits from those NOLs is dependent upon our ability to generate
sufficient income prior to their expiration. In addition, our NOL
carryforwards may be limited if we experience an ownership change
as defined by Section 382 of the Internal Revenue Code. In general,
an ownership change under Section 382 occurs if 5% shareholders
increase their collective ownership of the aggregate amount of our
outstanding shares by more than 50 percentage points over a
relevant lookback period. The sale of additional equity securities
may trigger an ownership change under Section 382 which will
significantly limit our ability to utilize our tax benefits. In
order to avoid limitations imposed by Section 382 of the Code, we
may be limited in the amount of additional equity securities we are
able to sell to raise capital.
Our litigation funding arrangements may impair our ability to
obtain future financing and/or generate sufficient cash flows to
support our future operations.
We have
funded much of our cost of litigation through contingent financing
arrangements with Brickell Key Investments LP
(“Brickell”) and contingent fee arrangements with legal
counsel. The repayment obligation to Brickell is secured by the
majority of our assets until such time that we have repaid a
specified minimum return. Furthermore, our contingent financing
arrangements will result in reductions in the amount of net
proceeds retained by us from litigation, licensing and other
patent-related activities. For example, Brickell is currently
entitled to priority payment of at least the next
$14.7 million in patent-related proceeds received by us.
Thereafter, any remaining net proceeds will be prorated between us,
our legal counsel and Brickell. The long-term continuation of our
business plan is dependent upon our ability to secure sufficient
financing to support our business, and our ability to generate
revenues and/or patent related proceeds sufficient to offset
expenses and meet our contingent payment obligation. Failure to
generate revenue or other patent-related proceeds sufficient to
repay our contingent obligation may impede our ability to obtain
additional financing which will have a material adverse effect on
our ability to achieve our long-term business
objectives.
Our litigation can be time-consuming, costly and we cannot
anticipate the results.
Since
2011, we have spent a significant amount of our financial and
management resources to pursue patent infringement litigation
against third parties. We believe this litigation, and other
litigation matters that we may in the future determine to pursue,
could continue to consume management and financial resources for
long periods of time. There can be no assurance that our current or
future litigation matters will ultimately result in a favorable
outcome for us. In addition, even if we obtain favorable interim
rulings or verdicts in particular litigation matters, they may not
be predictive of the ultimate resolution of the matter. Unfavorable
outcomes could result in exhaustion of our financial resources and
could otherwise hinder our ability to pursue licensing and/or
product opportunities for our technologies which would have a
material adverse impact on our financial condition, results of
operations, cash flows, and business prospects. We have contingent
fee arrangements in place with others to reduce our litigation
related expenditures; however, any litigation-based or other
patent-related amounts collected by us will be subject to
contingency payments to our legal counsel and other funding parties
which will reduce the amount retained by us.
If our patents and intellectual property rights do not provide us
with the anticipated market protections, our competitive position,
business, and prospects will be impaired.
We rely
on our intellectual property rights, including patents and patent
applications, to provide competitive advantage and protect us from
theft of our intellectual property. We believe that our patents are
for entirely new technologies and that our patents are valid,
enforceable and valuable. However, third parties have made claims
of invalidity with respect to certain of our patents and other
similar claims may be brought in the future. For example, the
Federal Patent Court in Munich recently invalidated one of our
patents that is the subject of infringement cases against LG and
Apple in Germany following a nullity claim filed by Qualcomm.
Additionally, the District Court in Munich, Germany recently ruled
that Apple does not infringe one of our other patents. If our
patents are shown not to be as broad as currently believed, or are
otherwise challenged such that some or all of the protection is
lost, we will suffer adverse effects from the loss of competitive
advantage and our ability to offer unique products and
technologies. As a result, there would be an adverse impact on our
financial condition and business prospects. Furthermore, defending
against challenges to our patents may give rise to material costs
for defense and divert resources away from our other
activities.
We are subject to outside influences beyond our control, including
new legislation that could adversely affect our licensing and
enforcement activities and have an adverse impact on the execution
of our business plan.
Our
licensing and enforcement activities are subject to numerous risks
from outside influences, including new legislation, regulations and
rules related to obtaining or enforcing patents. For instance, the
U.S. has enacted sweeping changes to the U.S. patent system
including changes that transition the U.S. from a
“first-to-invent” to a “first-to-file”
system and that alter the processes for challenging issued patents.
To the extent that we are unable to secure patent protection for
our future technologies and/or our current patents are challenged
such that some or all of our protection is lost, we will suffer
adverse effects to our ability to offer unique products and
technologies. As a result, there would be an adverse impact on our
financial position, results of operations and cash flows and our
ability to execute our business plan.
Our industry is subject to rapid technological changes which if we
are unable to match or surpass, will result in a loss of
competitive advantage and market opportunity.
Because
of the rapid technological development that regularly occurs in the
wireless technology industry, along with shifting user needs and
the introduction of competing products and services, we have
historically devoted substantial resources to developing and
improving our technology and introducing new product offerings. As
a result of our 2018 cost reduction measures, we halted all
research and development efforts in the second quarter of 2019,
which could result in a loss in market opportunity and obsolescence
of our technologies which could adversely affect our revenue
potential.
If our technologies and/or products are not commercially accepted,
our developmental investment will be lost and our ability to do
business will be impaired.
There
can be no assurance that our research and development will produce
commercially viable technologies and products, or that our
technologies and products will be established in the market as
improvements over current competitive offerings. If our existing or
new technologies and products are not commercially accepted, the
funds expended will not be recoverable, and our competitive and
financial position will be adversely affected. In addition,
perception of our business prospects will be impaired with an
adverse impact on our ability to do business and to attract capital
and employees.
If we fail to properly estimate customer demand for our products,
an oversupply of component parts could result in excess or obsolete
inventory that could adversely affect our operating
results.
Our operating results would be adversely affected if, anticipating
greater demand for our products than actually develops, we commit
to the purchase of more component parts than we need which is more
likely to occur in a period of demand uncertainties such as during
the rollout of a new product line like our Milo product line. In
addition, component purchase commitments made by us in order to
shorten lead times could also lead to excess and obsolete inventory
charges. If we fail to anticipate customer demand properly,
an oversupply of component
parts could result in excess or obsolete components that could
adversely affect our gross margins and operating results. For
example, the demand for our Milo product line to date has been
significantly less than anticipated resulting in an oversupply of
both component parts and finished products. We incurred impairment
charges for the year ended December 31, 2018 of approximately $1.1
million as a result of this excess inventory. These impairment
charges adversely affected our gross margins and operating
results.
If we experience quality issues with our products, our competitive
position, business and market opportunity may be
impaired.
We
produce products that incorporate leading-edge technology,
including both hardware and software. Software typically contains
bugs that can unexpectedly interfere with expected operations.
There can be no assurance that our pre-shipment testing programs
will be adequate to detect all defects, either ones in individual
products or ones that could affect numerous shipments, which might
interfere with customer satisfaction, reduce sales opportunities,
or affect gross margins. If we have to replace certain components
and provide remediation in response to the discovery of defects or
bugs in products that we had shipped, there can be no assurance
that such remediation would not have a material impact. An
inability to cure a product defect could result in the failure of a
product line, damage to our reputation, inventory costs, or product
reengineering expenses, any of which could have a material impact
on our revenue, margins, and net losses.
We are highly dependent on Mr. Jeffrey Parker as our chief
executive officer. If his services were lost, it would have an
adverse impact on the execution of our business plan.
Because
of Mr. Parker’s leadership position in our company and the
respect he has garnered in both the industry in which we operate
and the investment community, the loss of his services might be
seen as an impediment to the execution of our business plan. If Mr.
Parker was no longer available to our company, investors might
experience an adverse impact on their investment. We maintain
$5 million in key-employee life insurance for our benefit for
Mr. Parker.
If we are unable to attract or retain key executives and other
highly skilled employees, we will not be able to execute our
current business plans.
Our
business is dependent on having skilled and specialized key
executives and other employees to conduct our business activities.
The inability to obtain or retain these key executives and other
specialized employees would have an adverse impact on the research,
development, and technical support activities and the financial
reporting and regulatory compliance activities that our business
requires. These activities are instrumental to the successful
execution of our business plan.
Any disruptions to our information technology systems or breaches
of our network security could interrupt our operations, compromise
our reputation, expose us to litigation, government enforcement
actions, and costly response measures and could have a material
adverse effect on our business, financial condition and results of
operations.
We rely
on information technology systems, including third-party hosted
servers and cloud-based servers, to keep business, financial, and
corporate records, communicate internally and externally, and
operate other critical functions. If any of our internal systems or
the systems of our third-party providers are compromised due to
computer virus, unauthorized access, malware, and the like, then
sensitive documents could be exposed or deleted, and our ability to
conduct business could be impaired. Cyber incidents can result from
deliberate attacks or unintentional events. These incidents can
include, but are not limited to, unauthorized access to our
systems, computer viruses or other malicious code, denial of
service attacks, malware, ransomware, phishing, SQL injection
attacks, human error, or other events that result in security
breaches or give rise to the manipulation or loss of sensitive
information or assets. Cyber incidents can be caused by various
persons or groups, including disgruntled employees and vendors,
activists, organized crime groups, and state-sponsored and
individual hackers. Cyber incidents can also be caused or
aggravated by natural events, such as earthquakes, floods, fires,
power loss, and telecommunications failures. The risk of
cybersecurity breach has generally increased as the number,
intensity, and sophistication of attempted attacks from around the
world has increased. While we have cyber security procedures in
place, given the evolving nature of these threats, there can be no
assurance that we will not suffer material losses in the future due
to cyber-attacks.
To
date, we have not experienced any material losses relating to
cyber-attacks, computer viruses or other systems failures. Although
we have taken steps to protect the security of data maintained in
our information systems, it is possible that our security measures
will not be able to prevent the systems’ improper functioning
or the improper disclosure of personally identifiable information,
such as in the event of cyber-attacks. In addition to operational
and business consequences, if our cybersecurity is breached, we
could be held liable to our customers or other parties in
regulatory or other actions, and we may be exposed to reputation
damages and loss of trust and business. This could result in costly
investigations and litigation, civil or criminal penalties, fines
and negative publicity.
Risks Relating To Our Common Stock
Our outstanding options, warrants, and restricted stock units may
affect the market price and liquidity of our common
stock.
At June
30, 2019, we had 31,730,872 shares of Common Stock outstanding and
had outstanding options and warrants for the purchase of up to
12.8 million additional shares of common stock, of which
approximately 12.7 million were exercisable as of June 30, 2019.
The outstanding warrants include pre-funded warrants for the
purchase of up to 1.4 million shares of common stock at an exercise
price of $0.01 per share. In addition, in August 2019, our board of
directors granted nonqualified stock options to executives, key
employees and nonemployee directors for the purchase of up to an
aggregate of 10.55 million shares of our Common Stock. The options
vest in eight equal quarterly increments commencing September 1,
2019, provided that such options will not be exercisable unless and
until we have sufficient authorized unissued shares or treasury
shares available for such exercise. In addition, as described more
fully below, holders of convertible notes may elect to receive a
substantial number of shares of common stock upon conversion of the
notes and we may elect to pay accrued interest on the notes in
shares of our common stock. All of the shares of common stock
underlying these securities are or will be registered for sale to
the holder or for public resale by the holder. The amount of common
stock reserved for issuance may have an adverse impact on our
ability to raise capital and may affect the price and liquidity of
our common stock in the public market. In addition, the issuance of
these shares of common stock will have a dilutive effect on current
stockholders’ ownership.
The conversion of outstanding convertible notes into shares of
common stock, and the issuance of common stock by us as payment of
accrued interest upon the convertible notes, could materially
dilute our current stockholders.
We have aggregate principal of $2.8 million in convertible notes
outstanding at June 30, 2019 and in July 2019, we sold $0.75
million in additional convertible notes. The notes are convertible
into shares of our common stock at fixed conversion prices, which
may be less than the market price of our common stock at the time
of conversion. If the entire principal is converted into shares of
common stock, we would be required to issue an aggregate of up to
20.3 million shares of common stock. If we issue all of these
shares, the ownership of our current stockholders will be
diluted.
Further, we may elect to pay interest on the notes, at our option,
in shares of common stock, at a price equal to the then-market
price for our common stock. We currently do not believe that we
will have the financial ability to make all payments on the notes
in cash when due. Accordingly, we currently intend to make such
payments in shares of our common stock to the greatest extent
possible. Such interest payments could further dilute our current
stockholders.
The price of our common stock may be subject to substantial
volatility.
The
trading price of our common stock has been and may continue to be
volatile. Between July 1, 2017 and June 30, 2019, the reported high
and low sales prices for our common stock ranged between $0.06 and
$2.24 per share. The price of our common stock may continue to be
volatile as a result of a number of factors, some of which are
beyond our control. These factors include, but are not limited to,
developments in outstanding litigation, our performance and
prospects, general conditions of the markets in which we compete,
and economic and financial conditions. Such volatility could
materially and adversely affect the market price of our common
stock in future periods.
Our common stock was delisted from the Nasdaq Capital Market and is
now quoted on OTCQB, an over-the-counter market. There can be no
assurance that our common stock will continue to trade on the OTCQB
or on another over-the-counter market or securities
exchange.
Trading of our common stock on the Nasdaq Capital Market was
suspended effective at the open of business on August 17, 2018 as a
result of our failure to maintain at least $35 million in market
value of listed securities. Our common stock began trading on the
OTCQB, an over-the-counter market, immediately following delisting
from Nasdaq, under the symbol “PRKR”. The
over-the-counter market is a significantly more limited market than
Nasdaq, and the quotation of our common stock on the
over-the-counter market may result in a less liquid market
available for existing and potential stockholders to trade shares
of our common stock. Securities traded in
the over-the-counter market generally have less liquidity due to
factors such as the reduced number of investors that will consider
investing in the securities, the reduced number of market makers in
the securities, and the reduced number of securities analysts that
follow such securities. As a result, holders of shares of our
common stock may find it difficult to resell their shares at prices
quoted in the market or at all. We may be subject to additional
compliance requirements under applicable state laws relating to the
issuance of our securities. This could have a long-term adverse effect on our
ability to raise capital, which ultimately could adversely affect
the market price of our common stock. Delisting could also have
other negative results, including the potential loss of confidence
by employees, the loss of institutional investor interest and fewer
business development opportunities. We cannot provide
any assurances as to if or when we will be in a position to
relist our common stock on a nationally-recognized securities
exchange.
Our common stock is classified as a “penny stock” under
SEC rules, which means broker-dealers who make a market in our
stock will be subject to additional compliance
requirements.
Our common stock is deemed to be a "penny stock" as defined in the
Securities Exchange Act of 1934 (the “Exchange Act”).
Penny stocks are stocks (i) with a price of less than five dollars
per share; (ii) that are not traded on a recognized national
exchange; (iii) whose prices are not quoted on an automated
quotation system sponsored by a recognized national securities
association; or (iv) whose issuer has net tangible assets less than
$2,000,000 (if the issuer has been in continuous operation for at
least three years); or $5,000,000 (if continuous operations for
less than three years); or with average revenues of less than
$6,000,000 for the last three years. The Exchange Act requires
broker-dealers dealing in penny stocks to provide potential
investors with a document disclosing the risks of penny stocks and
to obtain a manually signed and dated written receipt of the
document before effecting any transaction in a penny stock for the
investor’s account. Potential investors in our common stock
are urged to obtain and read such disclosure carefully before
purchasing any shares that are deemed to be “penny
stock.” Further, the Exchange Act requires broker-dealers
dealing in penny stocks to approve the account of any investor for
transactions in such stocks before selling any penny stock to that
investor. These procedures require the broker-dealer to (i) obtain
from the investor information concerning his, her or its financial
situation, investment experience and investment objectives; (ii)
reasonably determine, based on that information, that transactions
in penny stocks are suitable for the investor, and that the
investor has sufficient knowledge and experience as to be
reasonably capable of evaluating the risks of penny stock
transactions; (iii) provide the investor with a written statement
setting forth the basis on which the broker dealer made the
determination in (ii) above; and (iv) receive a signed and dated
copy of such statement from the investor, confirming that it
accurately reflects the investor’s financial situation,
investment experience and investment objectives. Compliance with
these requirements may affect the ability or willingness of
broker-dealers to sell our securities, and accordingly would affect
the ability of stockholders to sell their securities in the public
market. These additional procedures could also limit our ability to
raise additional capital in the future.
We do not currently pay dividends on our common stock and thus
stockholders must look to appreciation of our common stock to
realize a gain on their investments.
We do
not currently pay dividends on our common stock and intend to
retain our cash and future earnings, if any, to fund our business
plan. Our future dividend policy is within the discretion of our
board of directors and will depend upon various factors, including
our business, financial condition, results of operations and
capital requirements. We therefore cannot offer any assurance that
our board of directors will determine to pay special or regular
dividends in the future. Accordingly, unless our board of directors
determines to pay dividends, stockholders will be required to look
to appreciation of our common stock to realize a gain on their
investment. There can be no assurance that this appreciation will
occur.
Provisions in our certificate of incorporation and by-laws could
have effects that conflict with the interest of
shareholders.
Some
provisions in our certificate of incorporation and by-laws could
make it more difficult for a third party to acquire control of us.
For example, our board of directors is divided into three classes
with directors having staggered terms of office, our board of
directors has the ability to issue preferred stock without
shareholder approval, and there are advance notification provisions
for director nominations and submissions of proposals from
shareholders to a vote by all the shareholders under the by-laws.
Florida law also has anti-takeover provisions in its corporate
statute.
We have a shareholder protection rights plan that may delay or
discourage someone from making an offer to purchase our company
without prior consultation with the board of directors and
management, which may conflict with the interests of some of the
shareholders.
On
November 17, 2005, as amended on November 20, 2015, our
board of directors adopted a shareholder protection rights plan
which called for the issuance, on November 29, 2005, as a
dividend, of rights to acquire fractional shares of preferred
stock. The rights are attached to the shares of common stock and
transfer with them. In the future the rights may become
exchangeable for shares of preferred stock with various provisions
that may discourage a takeover bid. Additionally, the rights have
what are known as “flip-in” and “flip-over”
provisions that could make any acquisition of our company more
costly. The principal objective of the plan is to cause someone
interested in acquiring our company to negotiate with the board of
directors rather than launch an unsolicited bid. This plan may
limit, prevent, or discourage a takeover offer that some
shareholders may find more advantageous than a negotiated
transaction. A negotiated transaction may not be in the best
interests of the shareholders.
Sales of substantial amounts of our Common Stock by the selling
stockholders, or the perception that these sales could occur, could
adversely affect the price of our Common Stock.
The sale by the selling stockholders of a significant number of
shares of Common Stock, or the perception in the public markets
that these sales will occur, could have a material adverse effect
on the market price of our Common Stock.
USE OF PROCEEDS
The
selling stockholders will receive all of the proceeds from the sale
of the shares of Common Stock offered under this prospectus. We
will not receive proceeds from the sale of the shares by the
selling stockholders. However, to the extent the Park Consulting
Warrant is exercised for cash, we will receive up to an aggregate
of $180,000 in gross proceeds. We expect to use the proceeds from
the exercise of the Park Consulting Warrant, if any, for working
capital and corporate purposes.
THE PRIVATE PLACEMENTS
Convertible Notes Transactions
Between
June 7, 2019 and July 15, 2019, we entered into securities purchase agreements
(“Purchase Agreements”) for the sale of the Tranche 1
Notes for aggregate proceeds to us of $0.39 million. The principal,
and unpaid interest accrued on the Tranche 1 Notes, is convertible
into shares of our Common Stock at a fixed conversion price of
$0.10 per share. Any unconverted outstanding principal and unpaid
interest accrued on the Tranche 1 Notes is payable in cash on or
about the five-year anniversary of the issuance
date.
Interest of 8% per annum is payable on the Tranche 1 Notes in
quarterly installments beginning on the first three-month
anniversary of the issuance date following the effectiveness of the
registration statement related thereto, at our option, subject to
certain equity conditions, in either (i) cash or (ii) shares of
Common Stock, or (iii) a combination of cash and shares of Common
Stock. If we elect to pay accrued interest in shares of Common
Stock, the price per share will be determined by the then-market
price of the Common Stock, which may be less than the stated
conversion price of the Tranche 1 Notes.
On July
18, 2019, we entered into Purchase
Agreements for the sale of the Tranche 2 Notes for aggregate
proceeds to us of $0.70 million. The principal, and unpaid interest
accrued on the Tranche 2 Notes, is convertible into shares of our
Common Stock at a fixed conversion price of $0.08 per share. Any
unconverted outstanding principal and unpaid interest accrued on
the Tranche 2 Notes is payable in cash on or about the five-year
anniversary of the issuance date.
Interest of 7.5% per annum is payable on the Tranche 2 Notes in
quarterly installments beginning on the first three-month
anniversary of the issuance date following the effectiveness of the
registration statement related thereto, at our option, subject to
certain equity conditions, in either (i) cash or (ii) shares of
Common Stock, or (iii) a combination of cash and shares of Common
Stock. If we elect to pay accrued interest in shares of Common
Stock, the price per share will be determined by the then-market
price of the Common Stock, which may be less than the stated
conversion price of the Tranche 2 Notes.
At any time following the one-year anniversary of the issuance
date, we may prepay the then outstanding principal amount of the
Notes, along with any unpaid accrued interest (the
“Prepayment Amount”) upon thirty days’ written
notice. The holder will have the right within twenty days to
convert all or a portion of the Prepayment Amount into shares of
Common Stock at the fixed conversion price. Any Prepayment Amount
paid in cash will include a premium of 25% prior to the two-year
anniversary of the date such note was issued, 20% prior to the
three-year anniversary of the date such note was issued, 15% prior
to the four-year anniversary of the date such note was issued, or
10% thereafter.
The Notes provide for events of default that include (i)
failure to pay principal or interest when due, (ii) any breach of
any of the representations, warranties, covenants or agreements
made by us in the Purchase Agreements or Notes, (iii) events of
liquidation or bankruptcy, and (iv) a change in control. In the
event of default, the interest rate increases to 12% per annum and
the outstanding principal balance of the Notes plus all accrued
interest due may be declared immediately payable by the holders of
a majority of the then outstanding principal balance of the
Notes.
We also
entered into registration rights agreements (the
“Registration Rights Agreements”) with the holders of
the Notes pursuant to which we agreed to register the shares of
Common Stock underlying the Notes. We committed to file a
registration statement within 45 to 75 calendar days following the
closing date of each note and to cause the registration statement
to become effective within 60 to 90 calendar days following the
closing date (or within 120 to 150 calendar days in the event of a
full review of the registration statement by the SEC). 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 amount paid by the holders for
the Notes upon the occurrence of the event, and monthly thereafter,
up to a maximum of 6%.
Consulting Agreements
On June
7, 2019, we entered into a consulting agreement with Fisher to act
as special advisor to our chief executive officer with regard to
our future business strategies. As consideration for services to be
provided under the six-month term of the consulting agreement, we
issued 625,000 shares of unregistered Common Stock in exchange for
a nonrefundable retainer for services over the six-month term of
the agreement valued at approximately $60,000.
On July
22, 2019, we entered into a consulting agreement with Park
Consultants LLC to act as special advisor to our chief executive
officer with regard to our future business strategies. As
consideration for services to be provided under the eighteen-month
term of the consulting agreement, we issued a warrant to purchase
up to 1,800,000 shares of our Common Stock with an exercise price
of $0.10 per share in exchange for a nonrefundable retainer for
services. The Park Consulting Warrant is exercisable immediately
after issuance and expires five years following the issuance
date.
MARKET PRICE OF OUR COMMON STOCK AND RELATED STOCKHOLDER
MATTERS
Market Information
On
August 17, 2018, our Common Stock was delisted from Nasdaq and
began trading on the OTCQB, an over-the-counter market, under the
ticker symbol “PRKR”. Over-the-counter market
quotations reflect inter-dealer prices, without retail mark-up,
mark-down, or commission, and may not necessarily represent actual
transactions.
Holders
As of
July 31, 2019, we had approximately 58 holders of record and we
believe there are approximately 12,000 beneficial holders of our
Common Stock.
Dividends
We do
not currently pay dividends on our Common Stock and intend to
retain our cash and future earnings, if any, to fund our business
plan. Our future dividend policy is within the discretion of our
board of directors (“Board”) and will depend upon
various factors, including our business, financial condition,
results of operations and capital requirements.
Equity Plan Information
The
following table gives information as of August 15, 2019 about
shares of our Common Stock authorized for issuance under all of our
equity compensation plans (in thousands, except for per share
amounts):
Plan
Category
|
Number of securities to
be issued upon exercise
of outstanding options,
warrants and rights
|
Weighted-average
exercise price of outstanding options,
warrants and rights
|
Number of securities
remaining available for future issuance under
equity compensation plans (excluding securities
reflected in column (a))
|
|
|
|
|
Equity compensation
plans approved by security holders (1)
|
828
|
$2.41
|
642
|
Equity compensation
plans not approved by security holders (2)
|
10,550
|
$0.17
|
1,450
|
Total
|
11,378
|
|
2,092
|
(1)
Includes the 2000
Performance Equity Plan, the 2008 Equity Incentive Plan and the
2011 Long-Term Incentive Equity Plan. The types of awards that may
be issued under each of these plans is discussed more fully in Note
12 to our audited consolidated financial statements included
elsewhere in this prospectus.
(2)
Includes the 2019
Long-Term Incentive Plan. Shares will not be reserved, and options
granted pursuant to the 2019 Long-Term Incentive Plan will not be
exercisable, unless and until we have sufficient authorized
unissued shares or treasury shares available for such
exercise.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Executive Overview
We are
in the business of innovating fundamental wireless technologies and
products. We have designed and developed proprietary 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 (“U.S.”) and certain
foreign jurisdictions. We believe certain patents protecting our
proprietary technologies have been broadly infringed by others and
therefore our business plan includes enforcement of our
intellectual property rights through patent infringement litigation
and licensing efforts. We have also designed and developed a
consumer distributed WiFi product line that is being marketed under
the brand name Milo.
We
restructured our operations during the third quarter of 2018 in
order to reduce operating expenses in light of our limited capital
resources. Our primary business strategy is to support the
investments we have made in developing and protecting our
technologies by focusing on our patent enforcement program. We have
made significant investments in developing and protecting our
technologies and products, the returns on which are dependent upon
the generation of future revenues for realization. We expect to sell or otherwise exit the Milo
product operations in 2019 and intend to focus our resources solely
on licensing and enforcement of our wireless technologies. During
the second quarter of 2019, we ceased all research and development
efforts and, where applicable, repurposed resources to support our
patent enforcement and Milo sales and support
efforts.
Since
2011, we have been involved in patent infringement litigation
against Qualcomm and others for the unauthorized use of our
technology. We have expended significant resources since 2011 and
incurred significant debt for the enforcement and defense of our
intellectual property rights.
Recent Developments
Legal Proceedings
In
April 2019, the district court in Munich, Germany issued a ruling
in ParkerVision v. Apple II
that the Apple products do not infringe our ‘853 Patent. We
have opted not to appeal this decision. In addition, in July 2019,
we withdrew our January 2019 appeal to the German Supreme Court in
the Qualcomm v.
ParkerVision nullity action which will result in dismissal
of our infringement cases against Apple (ParkerVision v. Apple I) and LG
(ParkerVision v. LG
Electronics). We have accrued approximately $0.4 million for
estimated statutory court costs that may be assessed against us in
these cases. Approximately 45% of these estimated losses will be
covered by bonds that we have posted in these cases.
In July
2019, the district court for the Middle District of Florida
(Orlando division) issued a ruling denying Qualcomm’s request
to limit the claims and patents in ParkerVision v. Qualcomm and HTC. 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. A trial date of December 2020 has been proposed by the
parties.
In July
2019, the district court in the Middle District of Florida
(Jacksonville division) issued its claim construction order in
ParkerVision v. Apple and
Qualcomm which has been pending since an August 31, 2018
claim construction hearing. The court’s claim construction
order adopted our proposed construction for two of the six disputed
terms and the “plain and ordinary meaning” on the
remaining terms. In addition, the court denied Apple’s motion
for summary judgement.
Refer
to Note 11 in the interim condensed consolidated financial
statements for the period ended June 30, 2019 included elsewhere in
this prospectus for a discussion of the background of these and
other pending patent litigation.
Debt Financings
In February and March 2019, we sold an aggregate of $1.3 million in
convertible promissory notes to accredited investors. In June 2019
we sold an additional $0.3 million in convertible promissory notes
to accredited investors. The notes are convertible, at the option
of the holder, into shares of our common stock at a fixed
conversion price of $0.25 per share for the February and March
notes and $0.10 per share for the June notes. The notes pay
interest quarterly at a rate of 8% per annum and we may elect to
pay such interest in cash or shares, subject to certain equity
conditions. In addition, in May and June 2019, we entered into
short-term promissory notes with accredited investors for aggregate
proceeds of approximately $0.23 million. The notes are unsecured,
bear interest at a rate of 18% per annum, and mature at the earlier
of 90 days following the issuance date or upon our receipt of
additional litigation financing. Refer to Note 9 to the interim
condensed consolidated financial statements for the period ended
June 30, 2019 included elsewhere in this prospectus for a complete
discussion of the terms of these financings.
In addition, in July 2019, we sold convertible notes for aggregate
proceeds of $0.75 million to accredited investors. The first
tranche of notes with a face value of $0.05 million is convertible,
at the holders’ option, into shares of our common stock at a
fixed conversion price of $0.10 per share and bear interest at a
stated rate of 8% per annum. The second tranche of notes with an
aggregate face value of $0.7 million is convertible, at the
holders’ option, into shares of our common stock at $0.08 per
share and bear interest at a stated rate of 7.5% per
annum.
Consulting Agreements
In June
2019, we entered into a consulting agreement with Mark Fisher to
act as special advisor to our chief executive officer with regard
to our future business strategies. As consideration for services
provided under the six-month term of the agreement, we issued
625,000 shares of common stock, valued at approximately $0.06
million, as a nonrefundable retainer. In July 2019, we engaged an
additional consultant, Park Consultants LLC ("Park"), to act in an
advisory capacity over an 18-month term. As consideration for
services, we granted Park a warrant for the purchase of 1.8 million
shares of our common stock at an exercise price of $0.10 per share,
valued at approximately $0.2 million, as a nonrefundable retainer.
The warrant is immediately exercisable and expires in July
2024.
Share-based Compensation
In
August 2019, our Board adopted the 2019 Long-term Incentive Plan
(the "2019 Plan") to enable us to offer equity-based compensation
to our employees, officers, directors and consultants who have
been, are, or will be important to our success. Subject to
authorization of sufficient shares for issuance by our
stockholders, 12 million shares will be reserved for issuance under
the 2019 Plan. In addition, the Board authorized the grant of
two-year nonqualified stock options, with an exercise price of
$0.17 per share, vesting in 8 equal quarterly installments
commencing September 1, 2019, provided that such options shall not
be exercisable unless or until we have sufficient authorized
unissued shares or treasury shares available for such exercise.
Each of our three non-employee directors were granted an option to
purchase 800,000 shares, Jeffrey Parker, our chief executive
officer, was granted an option to purchase 6,000,000 shares,
Cynthia Poehlman, our chief financial officer, was granted an
option to purchase 1,000,000 shares, Gregory Rawlins, our chief
technical officer, was granted an option to purchase 750,000 shares
and one additional key employee was granted an option to purchase
400,000 shares. The aggregate grant-date fair value of the awards,
totaling approximately $1.5 million, will be recognized as
share-based compensation expense over the two-year life of the
awards.
Liquidity and Capital Resources
We have
incurred significant losses from operations and negative cash flows
in every year since inception and have utilized the proceeds from
the sales of our equity securities and contingent funding
arrangements with third-parties to fund our operations, including
the cost of litigation.
Six Months Ended June 30, 2019 and 2018
We used
cash for operations of approximately $2.6 million and $6.1 million
for the six months ended June 30, 2019 and 2018, respectively. At
June 30, 2019, we had a working capital deficit of approximately
$4.2 million and we had an accumulated deficit of approximately
$396.0 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 interim condensed consolidated
financial statements. The $3.5 million decrease in cash used for
operations year over year is primarily the result of the
restructuring of our operations in the third quarter of 2018 and
ongoing cost reduction measures.
For the
six months ended June 30, 2019, we received aggregate net proceeds
of approximately $1.64 million from the sale of convertible
promissory notes and $0.23 million for the issuance of short-term
notes. Of these proceeds, $0.15 million was used for retention
payments to legal counsel engaged to assist in a wide range of
activities that include our past, current and potential future
litigation actions. The remaining proceeds were used to fund our
operations.
At June
30, 2019, we had cash and cash equivalents of approximately $0.1
million. Our Milo product line has not generated expected revenues
to date and the amount and timing of proceeds from our patent
enforcement actions, if any, is difficult to predict. Although we
have made significant reductions in our operating costs, we will
need additional working capital to fund our operations and meet our
debt repayment obligations.
In July
2019, we sold additional convertible notes for aggregate proceeds
of $0.75 million. 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, additional litigation financing, 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.
Our
ability to meet our short-term liquidity needs, including our debt
repayment obligations, is dependent upon one or more of (i) our
ability to successfully negotiate licensing agreements and/or
settlements relating to the use of our technologies by others in
excess of our contingent payment obligations to Brickell and legal
counsel; and/or (ii) our ability to raise additional capital from
the sale of equity securities or other financing
arrangements.
Patent
enforcement litigation is costly and time-consuming and the outcome
is difficult to predict. We expect to continue to invest in the
support of our patent enforcement and licensing programs. We expect
that revenue generated from patent enforcement actions and/or
technology licenses in 2019, if any, after deduction of payment
obligations to Brickell and legal counsel, may not be sufficient to
cover our operating expenses. In the event we do not generate
revenues, or other patent-related proceeds, sufficient to cover our
operational costs and contingent repayment obligation, we will be
required to raise additional working capital through the sale of
equity securities or other financing arrangements.
The
long-term continuation of our business plan is dependent upon our
ability to secure sufficient financing to support our business, and
our ability to generate revenues and/or patent-related proceeds
sufficient to offset expenses and meet our contingent payment
obligation and other long-term debt repayment obligations. Failure
to generate sufficient revenues, raise additional capital through
debt or equity financings, and/or reduce operating costs could have
a material adverse effect on our ability to meet our short and
long-term liquidity needs and achieve our intended long-term
business objectives.
Years Ended December 31, 2018 and 2017
At
December 31, 2018, we had a working capital deficit of
approximately $2.1 million, an increase of approximately
$1.9 million compared to our working capital deficit at
December 31, 2017. The increase in working capital deficit is
largely due to increases in amounts payable to outside litigation
firms and a decrease in the carrying value of our inventory and
prepaid assets due to impairment charges associated with our August
2018 restructuring.
For the
year ended December 31, 2018, we incurred a net loss of
approximately $20.9 million and had an accumulated deficit of
approximately $392.3 million. Our independent registered
public accounting firm has included in their audit report an
explanatory paragraph expressing substantial doubt about our
ability to continue as a going concern. See Note 2 to our
consolidated financial statements included elsewhere in this
prospectus for a discussion of our liquidity and our ability to
continue as a going concern.
We used
cash for operations of $10.3 million in 2018, representing a
$3.8 million, or 27%, decrease from our use of cash for
operations in 2017. This decrease in cash usage is primarily the
result of a decrease in cash used for legal expenses associated
with our patent infringement litigation, largely offset by
increased cash usage related to inventory expansion and other costs
from the development and launch of our WiFi networking product
line.
We have
utilized the proceeds from the sale of equity and equity-linked
securities and our contingent funding arrangement with Brickell to
fund our operations, including litigation costs. We received net
proceeds of approximately $10.6 million and $14.7 million from
equity and debt financings for the years ended December 31,
2018 and 2017, respectively, including an aggregate of $4.0 million
and $1.0 million, respectively, received in connection with our
contingent funding arrangement with Brickell.
A
significant portion of our litigation costs since 2016 have been
funded by Brickell. See “Financial Condition” below for
a complete discussion of our obligation to Brickell. At December
31, 2018, our aggregate repayment obligation to Brickell was
recorded at its estimated fair value of $25.6 million. Although
current working capital will not be used to repay this obligation,
Brickell is entitled to priority payment of 100% of at least the
next $14.7 million in proceeds received by us from any
patent-related action. After priority payments to Brickell, any
remaining future net proceeds from specific patent enforcement
actions will be prorated and prioritized between us, our legal
counsel, and Brickell based upon a number of factors including
whether the proceeds are a result of a contingently-funded action,
the magnitude, nature and timing of the proceeds received, and the
contingent percentage agreed to between the parties. Based on our
current outstanding legal proceedings, management expects that the
contingent fees payable to Brickell and others could range from 25%
to 80% of the net proceeds remaining after priority reimbursement
to Brickell. These contingent fees are limited to specific actions
and are expected to decline following successful completion of our
current phase of licensing and patent enforcement
activities.
We had
cash and cash equivalents totaling approximately $1.5 million
at December 31, 2018. In the first quarter of 2019, we
received net proceeds of approximately $1.3 million from the
issuance of additional convertible debt securities. Although we
anticipate a significant decrease in our use of cash for operations
in 2019 as a result of our August 2018 cost reduction measures, we
expect this decrease to be somewhat offset by increases in our debt
repayments. At December 31, 2018, we had approximately $2.4 million
in debt obligations due to be repaid in 2019, an increase from $0.3
million in current debt obligations at December 31, 2017. This
increase in our short-term debt repayment obligations is primarily
the result of the issuance of a secured promissory note to our
litigation counsel in 2018 for unpaid fees and costs related to our
patent enforcement program. Our ability to meet our short-term
liquidity needs, including our debt repayment obligations, is
dependent upon one or more of (i) our ability to successfully
negotiate licensing agreements and/or settlements relating to the
use of our technologies by others in excess of our contingent
payment obligations to Brickell and legal counsel; and/or (ii) our
ability to raise additional capital from the sale of equity
securities or other financing arrangements.
Financial Condition
Intangible Assets
We
consider our intellectual property, including patents, patent
applications, trademarks, copyrights and trade secrets to be
significant to our business. Our intangible assets are pledged as
security for our secured contingent payment obligation with
Brickell, our secured note payable with our litigation counsel, and
our secured convertible note payable with Mark Fisher. The net book
value of our intangible assets was approximately $3.3 million, $3.9
million, and $5.1 million as of June 30, 2019 and December 31, 2018
and 2017, respectively. These assets are amortized using the
straight-line method over their estimated period of benefit,
generally fifteen to twenty years. The decrease in the carrying
value of our intangible assets for the six months ended June 30,
2019, is primarily the result of $0.4 million in patent
amortization expense and $0.2 million in losses recognized on the
disposal of certain patent assets. The decrease in the carrying
value of our intangible assets for the year ended December 31, 2018
is primarily the result of $1.1 million in patent amortization
expense recognized in 2018 combined with minimal cost additions to
our intangible assets as our portfolio matures. Management
evaluates the recoverability of intangible assets periodically and
takes into account events or circumstances that may warrant revised
estimates of useful lives or that may indicate impairment exists.
As part of our ongoing patent maintenance program, we may, from
time to time, abandon a particular patent if we determine fees to
maintain the patent exceed its expected recoverability. For the six
months ended June 30, 2019 and each of the years ended December 31,
2018 and 2017, we incurred losses of approximately $0.2 million,
$0.1 million, and $0.1 million, respectively, for the write off of
specific patent assets. These losses are included in operating
expenses in our consolidated statements of comprehensive
loss.
Secured Contingent Payment Obligation
Our
secured contingent payment obligation to Brickell was recorded at
its estimated fair value of $24.7 million, $25.6 million and $15.9
million as of June 30, 2019, and December 31, 2018 and 2017,
respectively. For the six months ended June 30, 2019, we recorded a
decrease in the fair value of our secured contingent payment
obligation of approximately $0.8 million. The increase of $9.7
million during the year ended December 31, 2018, is the result of a
$4.0 million increase from additional proceeds received from
Brickell in 2018 and a $5.7 million increase in the estimated fair
value of our repayment obligation to Brickell. The $5.7 million
increase in estimated fair value of this repayment obligation in
2018 is primarily the result of (i) returns on additional proceeds
received in 2018, (ii) increases in the estimated time frames for
repayment of the obligation and (iii) changes in estimated
probabilities for the timing and amount of repayments to Brickell.
Refer to Note 8 to our consolidated financial statements and Note
10 to our interim condensed consolidated financial statements
included elsewhere in this prospectus for a discussion of the fair
value measurement of our contingent payment
obligation.
Under
the funding agreement, Brickell has a right to reimbursement and
compensation from gross proceeds resulting from patent enforcement
and other patent monetization actions on a priority basis. Our
repayment obligation to Brickell is contingent upon receipt of
proceeds from our patents and the amount of our obligation varies
based on the magnitude, timing and nature of proceeds received by
us. As a result, we have elected to account for this obligation at
its estimated fair value which is subject to significant estimates
and assumptions as discussed in “Critical Accounting
Policies” below.
Brickell
is entitled to priority payment of 100% of at least the next
$14.7 million in proceeds received by us from any
patent-related action. Thereafter, Brickell is entitled to a
portion of additional patent-related proceeds up to at least a
specified minimum return which is determined as a percentage of the
funded amount and varies based on the timing of repayment. In
addition, Brickell is entitled to a pro rata portion of proceeds
from specified legal actions to the extent aggregate proceeds from
those actions exceed the specified minimum return. In the event of
a change in control of our Company, Brickell has the right to be
paid its return as defined under the agreement based on the
transaction price for the change in control event.
Brickell
holds a senior security interest in the majority of our assets
until such time as the specified minimum return is paid, in which
case, the security interest will be released except with respect to
the patents and proceeds related to specific legal actions. The
security interest is enforceable by Brickell in the event that we
are in default under the agreement. We are currently in compliance
with the provisions of the agreement.
In
2018, we received aggregate proceeds of $4.0 million from Brickell
including proceeds of $2.5 million received in December 2018. The
December 2018 funding was critical to meet our ongoing obligations,
particularly with regard to our litigation fees and expenses and
therefore, in connection with the transaction, we issued Brickell a
warrant to purchase up to 5.0 million shares of our common stock at
an exercise price of $0.16 per share. As the estimated fair value
of the payment obligation to Brickell resulting from this
additional funding exceeded the $2.5 million in proceeds received,
no value was assigned to the warrants.
Notes Payable
As of
June 30, 2019, we had approximately $2.7 million in notes payable,
including an unsecured promissory note payable to Sterne, Kessler,
Goldstein, & Fox, PLLC (“SKGF”), a related party,
of approximately $0.9 million, unsecured short term promissory
notes with accredited investors of approximately $0.23 million, and
a secured promissory note payable to Mintz, Levin, Cohn, Ferris,
Glovsky and Popeo, P.C. (“Mintz”) of $1.6 million.
Failure to comply with the payment terms of each of these notes
constitutes an event of default which, if uncured, will result in
the entire unpaid principal balance of the note and any unpaid,
accrued interest to become immediately due and payable. In
addition, an event of default results in an increase in the
interest rate under the SKGF and Mintz notes to a default rate of
12% per annum.
In
March 2019, we amended the note payable to SKGF to provide for a
waiver of the payment default, a decrease in the interest rate from
8% to 4% per year, an extension of the maturity date from March
2020 to April 2022, and a reduction in the monthly payment. As of
June 29, 2019, we amended the note to provide for a postponement of
past payment defaults and future payments until October 2019. As of
June 30, 2019, we were in compliance of all terms of the
agreement.
On
April 1, 2019 and again on June 29, 2019, Mintz waived past and
future payment defaults under the note through at least August
2019, provided that no other event of default occurs. Mintz also
waived acceleration of unpaid principal and interest as well as an
increase in the interest rate to the default rate of 12%. As of
June 30, 2019, we are in compliance with all the terms of the Mintz
note.
Convertible Notes
As of
June 30, 2019, we had approximately $2.77 million in convertible
notes payable. 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
convertible notes bear interest at a stated rate of 8% per annum
and interest payments are made on a quarterly basis. Interest is
payable, at our option and subject to certain equity conditions, in
either cash, shares of our common stock, or a combination
thereof. To date, all interest payments on the convertible
notes have been made in shares of our common stock.
We have
the option to prepay the notes any time following the one-year
anniversary of the issuance of the notes, subject to a premium on
the outstanding principal prepayment amount of 25% prior to the
two-year anniversary of the note issuance date, 20% prior to the
three-year anniversary of the note issuance date, 15% prior to the
four-year anniversary of the note issuance date, or 10% thereafter.
The notes provide for events of default that include failure to pay
principal or interest when due, breach of any of the
representations, warranties, covenants or agreements made by us,
events of liquidation or bankruptcy, and a change in control. In
the event of default, the interest rate increases to 12% per annum
and the outstanding principal balance of the notes plus all accrued
interest due may be declared immediately payable by the holders of
a majority of the then outstanding principal balance of the
convertible notes.
Deferred Tax Assets and Related Valuation Allowance
Deferred
tax assets and liabilities are recognized for the expected future
tax consequences of events that have been included in the financial
statements or tax returns. Deferred tax assets and liabilities are
determined based on differences between the financial statement
carrying amounts and the tax bases of assets and liabilities using
enacted tax rates in effect for the year in which the differences
are expected to reverse. Valuation allowances are established to
reduce deferred tax assets when, based on available objective
evidence, it is more likely than not that the benefit of such
assets will not be realized. As of December 31, 2018, we had
deferred tax assets of approximately $98 million, primarily related
to our net operating loss carryforwards, which were fully offset by
a valuation allowance due to the uncertainty related to realization
of these assets through future taxable income. In addition, our
ability to benefit from our net operating loss and other tax credit
carryforwards could be limited under Section 382 of the Internal
Revenue Code as more fully discussed in Note 9 to our consolidated
financial statements for the year ended December 31, 2018 included
elsewhere in this prospectus.
Results of Operations for Each of the Six Months Ended
June 30, 2019 and 2018
Revenue and Gross Margin
We reported no licensing revenue for the six-month periods ended
June 30, 2019 or 2018. Although we do anticipate licensing revenue
and/or settlement gains to result from our licensing and patent
enforcement actions, the amount and timing is highly unpredictable
and there can be no assurance that we will achieve our anticipated
results.
We reported product revenue of approximately $0.04 million and
$0.12 million for the six-month periods ended June 30, 2019 and
2018, respectively, from sales of our Milo-branded WiFi products.
Gross margins for the Milo product sales, before inventory
impairment charges, were 0% and 27%, respectively, for the six
months ended June 30, 2019 and 2018. The decrease in product
margins, before inventory impairment charges, is the result of
reduced selling prices. Our revenues from Milo products
to date have fallen short of our projections, and we have limited
resources to deploy toward increasing consumer awareness of our
products. As a result, we expect to sell or otherwise dispose of
the Milo product line in 2019.
Research and Development Expenses
Research and development expenses consist primarily of engineering
and related management and support personnel costs; fees for
outside engineering design services which we use from time to time
to supplement our internal resources; depreciation expense related
to our assets used in product development; prototype production and
materials costs; software licensing and support costs, which
represent the annual licensing and support maintenance for
engineering design and other software tools; and rent and other
overhead costs. Personnel costs include share-based compensation
amounts which have been determined based on the grant date fair
value of equity-based awards to our employees and then recorded to
expense over the vesting period of the award. Subsequent
to March 31, 2019, we halted all research and development efforts
and, where applicable, repurposed prior engineering resources to
support our patent enforcement programs or our Milo sales and
support.
Our research and development expenses decreased approximately
$1.5 million, or 82.2%, during the six months ended June 30,
2019 when compared to the same period in 2018. This decrease is
primarily the result of a $0.9 million reduction in
personnel costs, including a $0.1 million decrease in
share-based compensation expense, and a $0.2 million decrease in
consulting fees. Additionally, research and development
expenses decreased approximately $0.2 million due to personnel
being repurposed for selling, general and administrative purposes
including litigation support and Milo sales and
support.
The reductions in personnel costs is a result of the closure
of our Lake Mary design facility in the third quarter of 2018 along
with reductions in engineering executive and key employee
compensation during that same period. The reduction in
consulting fees is the result of cost reduction efforts pertaining
to our Milo product operations commencing in the third quarter
of 2018.
Selling, General, and Administrative Expenses
Selling, general and administrative expenses consist primarily of
executive, director, sales and marketing, and finance and
administrative personnel costs, including share-based compensation,
and costs incurred for advertising, insurance, shareholder
relations and outside legal and professional services, including
litigation expenses.
Our selling, general and administrative expenses decreased by
approximately $1.9 million, or 31.8%, during the six months
ended June 30, 2019 when compared to the same period in 2018. This
is primarily due to a $1.3 million decrease in personnel and
related expense, including a decrease in share-based compensation
expense of approximately $0.5 million, a decrease in marketing and
other consulting fees of approximately $0.5 million, a
decrease in noncash amortization expense of approximately $0.2
million, a decrease in travel costs and board compensation of
approximately $0.1 million each, and a decrease in Milo product
advertising costs of approximately $0.4 million. These decreases
are somewhat offset by a loss on disposal of certain patents of
approximately $0.2 million, and an increase in litigation-related
fees and expenses of
approximately $0.8 million.
The decrease in personnel costs during the six months ended June
30, 2019, is primarily the result of the reduction in personnel and
executive compensation as part of our recent cost reduction
measures, somewhat offset by the repurposing of engineering
personnel for litigation support and Milo sales support.
Share-based compensation expense decreased during the six months
ended June 30, 2019, compared to the same period in 2018 as a
result of lower stock prices and longer vesting periods for new
awards when compared to prior year awards. The decreases in
our marketing consulting fees, travel costs and Milo product
advertising for the six-month period is a result of our cost
reduction measures that commenced in the third quarter of
2018.
The decrease in noncash amortization expense for the six-month
period ended June 30, 2019, is the result of the expiration and/or
abandonment of a number of our patents and patent applications
since the third quarter of 2018.
The decrease in board compensation for the six-month period ended
June 30, 2019, is a result of our board restructuring in the third
quarter of 2018 and the waiver of any cash fees for board or
committee service by our nonemployee directors.
The increase in litigation related fees and expenses for the six
months ended June 30, 2019 is primarily the result of fees and
expenses incurred to support our German litigation, including
accruals for statutory court costs as a result of unfavorable court
decisions.
Change in Fair Value of Contingent Payment Obligation
We have elected to measure our secured contingent payment
obligation at fair value which is based on significant unobservable
inputs. We estimated the fair value of our secured contingent
payment obligation using an 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 six months ended June 30, 2019, we recorded a decrease in
the fair value of our secured contingent payment obligation of
approximately $0.8 million, compared to increases in fair
value of approximately $1.0 million for the same period in 2018.
The change in fair value is 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.
Results of Operations for Each of the Years Ended December 31,
2018 and 2017
We use
both generally accepted accounting principles (“GAAP”)
and non-GAAP financial measures for assessing our consolidated
results of operations. The non-GAAP measures we use include
Adjusted Net Loss and
Adjusted Net Loss per
Share. These non-GAAP measures exclude the effect on net
loss and net loss per share of (i) changes in fair value of our
secured contingent payment obligation and (ii) share-based
compensation expense. Share-based compensation is a non-cash
expense item that is subject to significant fluctuation in value
based on the volatility of the market price of our common stock,
and the expense recognized on a GAAP basis is not necessarily
indicative of the compensation realized by our executives,
employees and non-employee directors. The change in fair value of
our secured contingent payment obligation is subject to significant
estimates and assumptions regarding future events and, similar to
interest on long-term debt obligations, is a reflection of our cost
of financing rather than our operating activities. Accordingly, we
consider these non-GAAP measures to provide relevant supplemental
information to assist investors in better understanding our
operating results. These non-GAAP measures should not be considered
a substitute for, or superior to measures of financial performance
prepared in accordance with GAAP.
Refer
to “Reconciliation of Non-GAAP Financial Measures” in
this section for a reconciliation of these non-GAAP financial
measures to the most directly comparable GAAP measures for the
years ended December 31, 2018 and 2017.
Revenues and Gross Margins
We
reported no licensing revenue for the years ended December 31, 2018
or 2017. Although we do anticipate licensing revenue and/or
settlement gains to result from our licensing and patent
enforcement actions, the amount and timing is highly unpredictable
and there can be no assurance that we will achieve our anticipated
results.
We
reported product revenue of $0.1 million for each of the years
ended December 31, 2018 and 2017, respectively, from the sales
of our Milo-branded products. Our gross margins on Milo product
sales, before impairment charges, were approximately 24% and 25%
for the years ended December 31, 2018 and 2017, respectively. Our
revenues from Milo products to date have fallen short of our
projections, and we have limited resources to deploy towards
increasing consumer awareness of our products. As a result, for the
year ended December 31, 2018, we recorded $1.1 million in
impairment charges to reduce excess inventories to their estimated
net realizable value. For the year ended December 31, 2017, we
recognized approximately $0.1 million in impairment charges related
to excess inventory of our integrated circuits.
Research and Development Expenses
Research
and development expenses consist primarily of engineering and
related management and support personnel costs; fees for outside
engineering design services which we use from time to time to
supplement our internal resources; depreciation expenses related to
certain assets used in product development; prototype production
and materials costs for both chips and end-user products; software
licensing and support costs, which represent the annual licensing
and support maintenance for engineering design and other software
tools; and rent and other overhead costs for our engineering design
facility. Personnel costs include share-based compensation which
represents the grant date fair value of equity-based awards to our
employees which is attributed to expense over the service period of
the award.
Research
and development costs were approximately $2.9 million for the
year ended December 31, 2018 compared to approximately
$4.3 million for the year ended December 31, 2017,
representing a decrease of approximately $1.4 million, or 33%.
This decrease is primarily the result of a $0.9 million
decrease in personnel and related costs, including a $0.4 million
decrease in share-based compensation expense, a $0.4 million
decrease in costs related to chip design and fabrication, a $0.1
million decrease in software licensing and support costs, and a
$0.1 million decrease in facilities and related costs, offset by a
$0.2 million increase in outside consulting services.
The
decreases in personnel, chip fabrication, software and licensing,
and facilities costs are all a result of the August 2018
restructuring of operations which included a significant workforce
reduction, reduction in engineering executive compensation, and
closure of the Lake Mary engineering design facility. Share-based
compensation decreased as a result of decreases in the value of
current awards when compared to previous awards as a result of the
declining price of our common stock, longer vesting periods for new
awards, and forfeiture of awards in connection with our
restructuring. The increase in outside consulting services is a
result of resources utilized in connection with Milo product
development. These outside services are not expected to continue in
2019.
We
anticipate that our research and development expenses will decrease
further in 2019 as our focus will be on providing technical support
to the patent enforcement and licensing activities for our patent
portfolio with limited resources dedicated to further expansion of
our technologies and patents.
Selling, General, and Administrative Expenses
Selling,
general and administrative expenses consist primarily of executive,
director, sales and marketing, and finance and administrative
personnel costs, including share-based compensation, costs incurred
for advertising, insurance, shareholder relations and outside legal
and professional services, including litigation expenses, and
amortization and maintenance expenses related to our patent
assets.
Our
selling, general and administrative expenses were approximately
$10.4 million for the year ended December 31, 2018, as
compared to approximately $14.1 million for the year ended
December 31, 2017, representing a decrease of approximately
$3.7 million or 26%. This decrease is the result of a decrease
in litigation fees and expenses of approximately $1.5 million,
a decrease in outside consulting fees of approximately $1.4
million, a decrease in share-based compensation expense of
approximately $0.8 million, and a decrease in other personnel
costs, including travel costs, of approximately $0.2 million,
somewhat offset by an increase in advertising expense of
approximately $0.3 million.
The
decrease in litigation fees and expenses is primarily the result of
fees and expenses incurred in 2017 related to the ITC action that
was terminated in March 2017. Consulting fees decreased as a result
of a reduction in the use of outside professionals for marketing,
shareholder relations and business advisory activities in 2018. The
decrease in marketing consulting fees for the Milo product launch
was somewhat offset by an increase in Milo advertising expense as
various marketing campaigns were launched in 2018.
The
decrease in share-based compensation is due to decreases in the
value of current awards when compared to previous awards as a
result of the declining price of our common stock, longer vesting
periods for new awards, and forfeiture of awards. Personnel costs
decreased as a result of reductions in executive management
salaries and a reduction in marketing, sales and administrative
personnel as a part of our August 2018 restructuring, somewhat
offset by personnel additions in mid to late 2017 to support the
Milo product operations.
Restructuring Charges
We
incurred approximately $0.7 million in restructuring charges in
2018. These charges are a result of the implementation of cost
reduction measures in August 2018 that included a significant
reduction in our workforce, the closure of our engineering design
center in Lake Mary, Florida, the cessation of ongoing chip
development activities, and a significant reduction in our spending
for sales and marketing of our Milo product line. These measures
were undertaken in order to focus our limited resources toward our
patent enforcement program which, if successful, has the ability to
generate significant licensing and/or settlement revenue. The
restructuring charges were primarily related to one-time
termination benefits, the impairment of prepaid assets, and our
estimated future lease obligation for our Lake Mary, Florida
facility, net of estimated sublease income. At December 31, 2018,
we recorded an estimated lease obligation for our Lake Mary
facility of approximately $0.2 million which is net of an estimated
$0.4 million in future sublease rental income. We are actively
marketing the Lake Mary facility for sublease, however there can be
no assurance that our efforts will be successful. If we are unable
to sublet our Lake Mary facility for the rental amount or term that
we have estimated, we will incur additional impairment charges
related to this lease obligation. In addition, we may incur
restructuring charges in 2019 related to the disposition of our
Milo product operations.
As a
result of our restructuring, we estimate that we will recognize
annualized savings of approximately $9 million primarily related to
reduced personnel, outside marketing consulting and advertising
costs related to product marketing, facilities costs, and board and
executive compensation.
Change in Fair Value of Contingent Payment Obligation
Our
losses from the changes in fair value of our contingent payment
obligation were approximately $5.7 million and
$0.7 million for the years ended December 31, 2018 and
2017, respectively. See “Financial Condition” above for
a discussion of our contingent payment obligation and the factors
impacting the change in fair value.
Adjusted Net Loss and Adjusted Net Loss per Share
Adjusted
net loss decreased by approximately $2.2 million, or 14%, for
the year ended December 31, 2018 compared to the same period
in 2017. The decrease in adjusted net loss is a result of the
decrease in litigation expenses as well as a decrease in operating
expenses as a result of our restructuring. On a per share basis,
our adjusted net loss per common share decreased by $0.35 per
share, or 38%. This decrease is primarily the result of a 38%
increase in our weighted average common shares outstanding along
with the decrease in our adjusted net loss.
Reconciliation of Non-GAAP Financial Measures
The
following table presents a reconciliation of our net loss to the
non-GAAP measure of adjusted net loss for the years ended
December 31, 2018 and 2017, respectively:
(in
thousands)
|
|
|
Net
loss
|
$(20,869)
|
$(19,259)
|
Excluded
items:
|
|
|
Share-based
compensation
|
1,050
|
2,164
|
Change
in fair value of contingent payment obligation
|
5,661
|
711
|
Adjusted
net loss
|
$(14,158)
|
$(16,384)
|
The
following table presents a reconciliation of our net loss per
common share to the non-GAAP measure of adjusted net loss per
common share for the years ended December 31, 2018 and 2017,
respectively:
|
|
|
Basic and diluted
net loss per common share
|
$(0.85)
|
$(1.09)
|
|
0.27
|
0.16
|
Adjusted net loss
per common share
|
$(0.58)
|
$(0.93)
|
Critical Accounting Policies
We
believe that the following are critical accounting policies and
estimates that significantly impact the preparation of our
consolidated financial statements:
Inventory
Inventory
is stated at the lower of actual cost, as determined under the
first-in, first-out method, or estimated net realizable value. We
review our inventory for estimated obsolescence or unmarketable
inventory and write down inventory for the difference between cost
and estimated market value based upon assumptions about future
demand. Future demand is affected by market conditions,
technological obsolescence, new products and strategic plans, each
of which is subject to change. During the years ended December 31,
2018 and 2017, we recorded $1.1 million and $0.1 million,
respectively, for impairment charges to reduce excess inventories
to their estimated net realizable value.
Secured Contingent Payment Obligation
We have
accounted for our secured contingent repayment obligation as
long-term debt. Our repayment obligation is contingent upon the
receipt of proceeds from patent enforcement or other patent
monetization actions. We have elected to measure our secured
contingent payment obligation at its fair value based on the
variable and contingent nature of the repayment provisions. We have
determined that the fair value of our secured contingent payment
obligation falls within Level 3 in the fair value hierarchy which
involves significant estimates and assumptions including projected
future patent-related proceeds and the risk-adjusted rate for
discounting future cash flows. Actual results could differ from the
estimates made. Changes in fair value, including the component
related to imputed interest, are included in the consolidated
statements of comprehensive loss under the heading “Change in
fair value of contingent payment obligation.” Refer to Note
10 to our interim condensed consolidated financial statements and
Note 8 to our consolidated financial statements included elsewhere
in this prospectus for a discussion of the significant estimates
and assumptions used in estimated the fair value of our contingent
payment obligation.
Accounting for Share-Based Compensation
We
calculate the fair value of share-based equity awards to employees,
including restricted stock, stock options and restricted stock
units (“RSUs”), on the date of grant and recognize the
calculated fair value as compensation expense over the requisite
service periods of the related awards. The fair value of stock
option awards is determined using the Black-Scholes option
valuation model which requires the use of highly subjective
assumptions and estimates including how long employees will retain
their stock options before exercising them and the volatility of
our common stock price over the expected life of the equity award.
Changes in these subjective assumptions can materially affect the
estimate of fair value of share-based compensation and
consequently, the related amount recognized as expense in the
consolidated statements of comprehensive loss.
New Accounting Pronouncement - Leases
As of
January 1, 2019, we adopted Accounting Standards Codification
(“ASC”) 842, “Leases.” ASC 842 requires
lessees to recognize right-of-use (“ROU”) assets and
lease liabilities on the balance sheet for all finance and
operating leases with lease terms of more than 12 months and
disclose key information about leasing arrangements (see Note 8 to
our condensed consolidated interim financial statements included
elsewhere in this prospectus). ASC 842 allows for the application
of the new standard on the adoption date without restatement of
prior comparative periods or a modified retrospective transition
method which requires application of the new standard at the
beginning of the earliest period presented. We have elected to use
the adoption date as the initial application date without
restatement of prior comparative periods. We also elected the
package of practical expedients permitted under the transition
guidance which, among other things, does not require us to reassess
lease classification. Upon adoption of ASC 842, we recognized an
adjustment to beginning retained earnings of approximately $0.04
million for the cumulative effect of the change in accounting
principle. We also recorded a ROU asset of approximately $0.56
million and an increase in our operating lease liabilities of
approximately $0.60 million, primarily related to operating leases
for our office and warehouse facilities. Our accounting for finance
leases remains substantially unchanged. Adoption of the standard
did not materially impact operating results or cash
flows.
Off-Balance Sheet Transactions
As of
June 30, 2019, we had outstanding warrants to purchase
approximately 11.7 million shares of our common stock, including
pre-funded warrants to purchase 1.4 million shares of our common
stock at an exercise price of $0.01 per share. The estimated grant
date fair value of these warrants of approximately $1.5 million is
included in shareholders’ deficit in our interim condensed
consolidated balance sheets. The outstanding warrants have a
weighted average exercise price of $0.45 per share and a weighted
average remaining life of approximately 4.2 years.
DESCRIPTION OF BUSINESS
We were
incorporated under the laws of the state of Florida on
August 22, 1989. We are in the business of innovating
fundamental wireless technologies and products. We have designed
and developed proprietary radio frequency (“RF”)
technologies and integrated circuits for use in wireless
communication products. We have expended significant financial and
other resources to research and develop our RF technologies and to
obtain patent protection for those technologies in the United
States of America (“U.S.”) and certain foreign
jurisdictions. We believe certain patents protecting our
proprietary technologies have been broadly infringed by others and
therefore our business plan includes enforcement of our
intellectual property rights through patent infringement litigation
and licensing efforts.
We have
also designed and developed a consumer distributed WiFi product
line that is marketed under the brand name Milo®. We expect to sell or otherwise exit the Milo
product operations in 2019 and intend to focus our resources solely
on licensing and enforcement of our wireless
technologies.
General Development of Business
Our
business has been primarily focused on the development, marketing
and licensing of our RF technologies for mobile and other
wireless products and applications, including our own
internally developed end-user wireless products. For a
number of years, we marketed our RF technologies and integrated
circuit products for use in mobile products and
applications. Our lack of tenure in the mobile handset
industry coupled with the unique nature of our technology resulted
in lengthy and intense technology evaluation and due diligence
efforts by potential customers. Furthermore, in order to utilize
our technology in a mobile handset application, we were reliant
upon the provider of the baseband processor that generates the data
to be transmitted or received by our RF
chipsets. Although our technology is capable of
interfacing with any baseband processor, the development of the
interface between the baseband processor and our chipset requires a
cooperative effort with the baseband provider. Accordingly, our
marketing efforts were dependent on the activities of third
parties. In 2011, through analysis of conference papers and tear
down reports, we concluded that Qualcomm’s products were
infringing our energy transfer sampling down conversion
technology. Based on our belief that our technology is
widely-deployed in the mobile handset market as a result of
infringement of our patents, we began to more vigorously pursue an
intellectual property licensing strategy which included enforcement
actions.
From
2014 through 2017, we pursued licensing opportunities for our
technologies, including through additional litigation where we
deemed necessary to protect our patent rights. In
addition to our patent enforcement activities, from 2013 through
2017, we also designed and developed products that included
integrated circuits (“ICs”) based on our proprietary
technologies as well end-user WiFi products aimed at the home and
small business networking market. These product
development efforts culminated in the launch of our Milo brand
product line, which began selling in October 2017.
During
the first half of 2018, we focused on (i) production, sales and
marketing, and continued developments and enhancements of our WiFi
products; (ii) ongoing integrated circuit development for future
products and (iii) supporting our patent enforcement and licensing
efforts. Our WiFi products did not produce the revenue growth that
we had anticipated in 2018 and we also experienced lengthy delays
in proceedings in certain of our patent enforcement
efforts.
In
addition, trading of our common stock on the Capital Market of The Nasdaq Stock Market
LLC (“Nasdaq”) was suspended effective at the open of
business on August 17, 2018 as a result of our failure to
maintain at least $35 million in market value of listed
securities. Our common stock began trading on the OTCQB, an
over-the-counter market, immediately following delisting from
Nasdaq and our trading symbol, “PRKR”, remained
unchanged. We intend to remain a public reporting company and we
plan to continue to maintain a majority of independent members on
our Board with an independent Audit Committee and to provide annual
financial statements audited by an independent registered public
accounting firm and unaudited interim financial statements prepared
in accordance with accounting principles generally accepted in the
U.S. However, the OTCQB is a significantly more limited market than
Nasdaq.
These
factors contributed to a lack of liquidity which necessitated a
change in our business plans. Accordingly, in August 2018,
we implemented cost reduction measures
that included a significant reduction in our workforce, the closure
of our engineering design center in Lake Mary, Florida and a
reduction in executive and management salaries in order to reduce
our ongoing operating expenses. As a result of these measures, we
ceased ongoing chip development activities and significantly
curtailed our spending for sales and marketing of our WiFi product
line in order to focus our limited resources on our patent
enforcement program.
From a
patent enforcement standpoint, we spent much of 2018 defending our
patents in validity actions filed by defendants in our patent
infringement proceedings. See “Legal Proceedings” in
Note 11 to our interim condensed consolidated financial statements
for the period ended June 30, 2019 and Note 10 to our consolidated
financial statements for the year ended December 31, 2018 included
elsewhere in this prospectus for a detailed description of our
various patent enforcement actions.
Notably,
a prior stay has been lifted in our patent infringement case
against Qualcomm and HTC in the middle district of Florida as a
result of an appellate court decision regarding one of the patents
at issue in that case. In July 2019, the district court for the
Middle District of Florida (Orlando division) issued a ruling
denying Qualcomm’s request to limit the claims and patents in
ParkerVision v. Qualcomm and HTC. 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. A trial date of December
2020 has been proposed by the parties.
In
April 2019, the district court in Munich, Germany issued a ruling
in ParkerVision v. Apple II that the Apple products do not infringe
our ‘853 Patent. We have opted not to appeal this decision.
In addition, in July 2019, we withdrew our January 2019 appeal to
the German Supreme Court in the Qualcomm v. ParkerVision nullity
action which will result in dismissal of our infringement cases
against Apple (ParkerVision v. Apple I) and LG (ParkerVision v. LG
Electronics). We have accrued approximately $0.4 million for
estimated statutory court costs that may be assessed against us in
these cases. Approximately 45% of these estimated losses will be
covered by bonds that we have posted in these cases.
In
addition, in July 2019 the district court in the Middle District of
Florida (Jacksonville division) issued its claim construction order
in ParkerVision v. Apple and Qualcomm which has been pending since
an August 31, 2018 claim construction hearing. The court’s
claim construction order adopted our proposed construction for two
of the six disputed terms and the “plain and ordinary
meaning” on the remaining terms. In addition, the court
denied Apple’s motion for summary judgement. A trial date of
August 2020 has been proposed by the parties.
A
significant portion of our litigation costs are funded under a
secured contingent payment arrangement with Brickell Key
Investments LP (“Brickell”) and other contingent
arrangements with our legal counsel. In 2018, we received an
aggregate of $4.0 million in additional proceeds from Brickell to
fund our ongoing patent enforcement actions. In addition to
Brickell funding, we also funded our operations in 2018 through the
sale of approximately $5.3 million in equity and equity-linked
securities and $1.3 million in convertible debt. In addition, in
the first half of 2019, we received additional net proceeds of
approximately $1.6 million from the sale of additional convertible
notes and $0.23 million in proceeds from short-term, unsecured
promissory notes. See “Management’s Discussion and
Analysis of Financial Condition and Results of Operations”
elsewhere in this prospectus for a full discussion of our
litigation funding arrangements and our equity and debt
financings.
Milo WiFi Products
Our
Milo WiFi products did not generate the revenue growth that we
anticipated in the first half of 2018. Accordingly, as part of our
restructuring in August 2018, we made significant reductions in our
product sales, marketing, development and operations staff as well
as our expenditures for advertising and other marketing promotions,
causing sales to further decline. During the second quarter of
2019, we ceased all research and development efforts and, where
applicable, repurposed resources to support our patent enforcement
and Milo sales and support efforts. We expect to sell or otherwise
exit our WiFi product operations in 2019.
Product Offerings
Our
Milo-branded WiFi product line is a cost-effective networking
system that enhances WiFi connectivity by effectively distributing
the WiFi signal from existing routers and modems throughout a
broader coverage area, eliminating WiFi dead zones and creating a
more even distribution of data rates across the coverage area. Our
product offering includes a two-unit system designed for coverage
areas of up to 2,500 square feet, a three-unit system designed for
coverage areas of up to 3,750 square feet, and a single-unit
system, introduced in May 2018, that can be installed as a
stand-alone system for smaller homes and apartments, or installed
as an add-on to an existing Milo system for added
coverage.
The
Milo system can connect to an existing router via Ethernet cable.
Alternatively, the system can connect to the router wirelessly
through our BaseLink
technology thus enabling the Milo user to eliminate redundancy of
coverage from an existing router while also optimizing and
maximizing the overall coverage area. Our embedded SmartSeek intelligence enables the Milo
system to delegate signal communication across multiple radios in
each Milo unit, thereby optimizing the network path for each unique
environment. The systems are supported by mobile applications for
both Apple and Android devices to enhance the overall customer
experience.
Markets
We
marketed our Milo product line as a cost-effective product solution
for inadequate WiFi coverage to consumers, small businesses and
certain vertical markets, such as internet service providers. The
growing number of internet-connected devices, including smart
phones, laptops, tablets, Smart Home, and Internet of Things
devices such as Smart TVs, security cameras, thermostat controls,
game consoles, etc., have increased the need for more robust and
reliable networking solutions. Internet connections are being
upgraded through high-speed broadband technologies in order to
address more complex applications and rich multimedia content.
Meanwhile, users want the convenience and flexibility of operating
truly mobile devices. As a result, the need for more convenience,
broader coverage, and increased reliability of residential and
small business WiFi networks is increasing demand for reliable
wireless networking products.
Sales Channels
We
began selling our Milo WiFi products in the U.S. in 2017 primarily
through Amazon.com and our own online store. In 2018, we began
expanding our online sales channels to include Walmart.com and
NeweggBusiness.com. In addition, we utilized consignment
arrangements with a wholesale distributor to supply additional
online retail channels. During 2018, we also marketed our products
and related services directly to internet service providers in the
U.S. although we ceased these efforts following our August 2018
restructuring. The Amazon.com sales channel accounted for
approximately 66% and 60% of our net revenues for the years ended
December 31, 2018 and 2017, respectively. In addition, a QVC
distributor accounted for approximately 13% of our net revenue for
the year ended December 31, 2018.
Production and Supply
To
mitigate supply risk, and based on anticipated revenue growth, we
built up a significant Milo component and finished product
inventory in 2017. To date, our inventory has significantly
exceeded the demand generated by our marketing programs. As a
result, in connection with our restructuring in August 2018, we
ceased production and recognized impairment charges against our
on-hand inventories.
Our
components are generally purchased from third-party suppliers,
including contract manufacturers, on a purchase order basis. Our
components generally have multiple sources of supply; however, some
components are designed specifically for our products and, in some
cases, require specialty tooling. Our third-party suppliers
generally purchase the materials for these components on our behalf
on a purchase order basis. Lead times for our component products
are generally 60 to 90 days without incurring additional costs for
expediting.
Competitive Position
We
operate in a highly competitive industry against companies with
greater brand recognition and substantially greater financial,
technical, and sales and marketing resources. As a result, our
competitors have larger distribution channels and greater reach to
customers than we do.
Our
WiFi products compete with WiFi networking products offered by
companies such as Google, Belkin/Linksys, D-Link, NetGear, Eero
(purchased by Amazon), and others. We also face competition from
service providers who bundle competing networking devices with
their service offering. We believe the principal competitive
factors in the markets for our networking products include product
performance, ease-of-installation, price, and customer
support.
Our
technologies and integrated circuit products face competition from
incumbent providers of transceivers, such as Broadcom, Fujitsu,
Intel, MediaTek, NVidia, Qualcomm, STMicroelectronics, Marvell,
Texas Instruments, and others, as well as incumbent providers of
power amplifiers, including companies such as Anadigics, Qorvo, and
Skyworks, among others. Each of our competitors, however, also has
the potential of becoming a licensing or product customer for our
technologies. To date, we are unaware of any competing or emerging
RF technologies, other than infringing products, that provide all
the simultaneous benefits that certain of our technologies enable,
including highly accurate transmission and reception of RF carriers
that use less power than traditional architectures and components,
thereby extending battery life, reducing heat and enabling certain
size, cost, performance, and packaging advantages.
We
believe the most significant hurdle to the licensing and/or sale of
our technologies and products is the widespread use of certain of
our technologies in infringing products produced by companies with
significantly greater financial, technical and sales and marketing
resources. We believe we can gain adoption and/or secure licensing
agreements with unauthorized current users of one or more of our
technologies, and therefore compete, based on a solid and
defensible patent portfolio and the advantages enabled by our
unique circuit architectures.
Patents and Trademarks
We
consider our intellectual property, including patents, patent
applications, trademarks, and trade secrets to be significant to
our competitive positioning. We have a program to file applications
for and obtain patents, copyrights, and trademarks in the U.S. and
in selected foreign countries where we believe filing for such
protection is appropriate to establish and maintain our proprietary
rights in our technology and products. As of June 30, 2019, we had
122 U.S. and 14 foreign patents related to our RF technologies. In
addition, we have a number of U.S. and foreign patent applications
pending. We estimate the economic lives of our patents to be the
shorter of fifteen years from issuance or twenty years from the
earliest application date. Our current portfolio of issued patents
have expirations ranging from 2019 to 2034. We had approximately 52
patents that expired in 2018, including certain patents that are
the subject of enforcement actions. We believe these expired
patents continue to have significant economic value to us as a
result of our ability to collect past damages in the event of a
successful enforcement action.
Employees
As of
June 30, 2019, we had 12 full-time and 2 part-time employees,
including 5 in WiFi product sales and customer support, 2 in
technical support for our patent enforcement and licensing
programs, and 7 in executive management, finance, and
administration. We also utilize temporary or contract staff from
time to time to supplement our workforce. Our employees are not
represented by any collective bargaining agreements and we consider
our employee relations to be satisfactory.
Available Information and Access to Reports
We file
annual reports on Forms 10-K, quarterly reports on Forms 10-Q,
proxy statements and other reports, including any amendments
thereto, electronically with the SEC. The SEC maintains an Internet
site (http://www.sec.gov) where these reports may be obtained at no
charge. We also make copies of these reports available, free of
charge through our website (http://www.parkervision.com) via the
link “SEC filings” as soon as practicable after filing
or furnishing such materials with the SEC. We have not incorporated
by reference into this prospectus the information on our website,
and you should not consider it to be a part of this
prospectus.
Properties
Our
headquarters are located in a 3,000 square foot leased facility in
Jacksonville, Florida, that also serves as our warehousing space
for Milo product inventory. We have an additional 7,000 square foot
leased facility in Lake Mary, Florida that was primarily for
engineering design activities. As a result of our restructuring in
August 2018, we have ceased use of the Lake Mary facility and are
attempting to sublease the facility for the remaining lease term.
We believe our properties are in good condition and suitable for
the conduct of our business. Refer to “Leases” in Note
8 to our interim condensed consolidated financial statements and
“Lease Commitments” in Note 10 to our consolidated
financial statements included elsewhere in this prospectus for
information regarding our outstanding lease
obligations.
Legal Proceedings
We are
a party to a number of patent enforcement actions initiated by us
against others for the infringement of our technologies, as well as
proceedings brought by others against us in an attempt to
invalidate certain of our patent claims. These patent-related
proceedings are more fully described in “Legal
Proceedings” in Note 11 to our interim condensed consolidated
financial included elsewhere in this prospectus.
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Directors
Our
Board is divided into three classes with only one class of
directors typically being elected in each year and each class
serving a three-year term. In September 2018, our Board decreased
its size from eight to five. In connection with this decrease in
size, Messrs. Papken der Torossian, William Hightower, John
Metcalf, and Nam Suh resigned. The
resignation of these directors was not due to any disagreement with
us on any matter relating to our operations, policies, practices,
or otherwise. The Board appointed Lewis H. Titterton to fill the
vacancy resulting from the director resignations. Mr. Titterton was
also appointed as chairman of our audit committee. In April 2019,
Mr. Titterton resigned from our Board due to family medical issues.
Mr. Titterton’s resignation was not due to any disagreement
with us on any matter relating to our operations, policies, or
practices, financial or otherwise.
Our
current directors, including their backgrounds and qualifications
are as follows:
Name
|
|
Position with
our Company
|
Frank N.
Newman
|
76
|
Class II
Director
|
Jeffrey L.
Parker
|
62
|
Class I Director,
Chairman of the Board and Chief Executive Officer
|
Paul A.
Rosenbaum
|
76
|
Class III Director,
Audit Committee Member
|
Robert G.
Sterne
|
67
|
Class III
Director
|
Frank N. Newman
Frank
Newman has been a director of ours since December 2016. Mr. Newman
has served since 2011 as chairman of Promontory Financial Group
China Ltd., an advisory group for financial institutions and
corporations in China. From 2005 to 2010, he served as chairman and
chief executive officer of Shenzhen Development Bank, a national
bank in China. Prior to 2005, Mr. Newman served as chairman,
president, and chief executive officer of Bankers Trust and chief
financial officer of Bank of America and Wells Fargo Bank. Mr.
Newman served as Deputy Secretary of the U.S. Treasury from 1994 to
1995 and as Under Secretary of Domestic Finance from 1993 to 1994.
He has authored two books and several articles on economic matters,
published in the U.S., mainland China, and Hong Kong. Mr. Newman
has served as a director for major public companies in the U.S.,
United Kingdom, and China, and as a member of the Board of Trustees
of Carnegie Hall. He earned his BA, magna cum laude, in economics
at Harvard. Mr. Newman brings a substantial knowledge of
international banking and business relationships to the Board. His
contacts, particularly in China, including Hong Kong, could prove
valuable to our international strategies. In addition, his
financial background adds an important expertise to the Board with
regard to financing future business opportunities.
Jeffrey L. Parker
Jeffrey
Parker has been the Chairman of our Board and our Chief Executive
Officer since our inception in August 1989 and was our president
from April 1993 to June 1998. From March 1983 to August 1989, Mr.
Parker served as executive vice president for Parker Electronics,
Inc., a joint venture partner with Carrier Corporation performing
research, development, manufacturing, and sales and marketing for
the heating, ventilation and air conditioning industry. Mr. Parker
is a named inventor on 31 U.S. patents. Among other qualifications,
as Chief Executive Officer, Mr. Parker has relevant insight into
our operations, our industry, and related risks as well as
experience bringing disruptive technologies to market.
Paul A. Rosenbaum
Paul A.
Rosenbaum has been a director of ours since December 2016 and a
member of our Audit Committee since September 2018. Mr. Rosenbaum
has extensive experience as a director and executive officer for
both public and private companies in a number of industries. Since
1994, Mr. Rosenbaum has served as chief executive of SWR
Corporation, a privately-held corporation that designs, sells, and
markets specialty industrial chemicals. Since 2009, Mr. Rosenbaum
has been a member of the Providence St. Vincent Medical Foundation
Council of Trustees, and previously served as president of the
Council. In addition, from September 2000 until June 2009, Mr.
Rosenbaum served as chairman and chief executive officer of Rentrak
Corporation (“Rentrak”), a Nasdaq
publicly traded company that provides transactional media
measurement and analytical services to the entertainment and media
industry. From June 2009 until July 2011, Mr. Rosenbaum served in a
non-executive capacity as chairman of Rentrack. From 2007 until
2016, Mr. Rosenbaum served on the Board of Commissioners for the
Port of Portland, including as vice chairman from 2012 to 2016. Mr.
Rosenbaum was chief partner in the Rosenbaum Law Center from 1978
to 2000 and served in the Michigan Legislature from 1972 to 1978,
during which time he chaired the Michigan House Judiciary
Committee, was legal counsel to the Speaker of the House of the
state of Michigan and wrote and sponsored the Michigan
Administrative Procedures Act. Additionally, Mr. Rosenbaum served
on the National Conference of Commissioners on Uniform State Laws,
as vice chairman of the Criminal Justice and Consumer Affairs
Committee of the National Conference of State Legislatures, and on
a committee of the Michigan Supreme Court responsible for reviewing
local court rules. Among other
qualifications, Mr. Rosenbaum has extensive experience as a
director and executive officer of a publicly held corporation and
has relevant insights into operations and our litigation
strategies.
Robert G. Sterne
Robert
Sterne has been a director of ours since September 2006 and also
served as a director of ours from February 2000 to June 2003. Since
1978, Mr. Sterne has been a partner of the law firm of Sterne,
Kessler, Goldstein & Fox PLLC, specializing in patent and other
intellectual property law. Mr. Sterne provides legal services to us
as one of our patent and intellectual property attorneys. Mr.
Sterne has co-authored numerous publications related to patent
litigation strategies. He has received multiple awards for
contributions to intellectual property law including Law
360’s 2016 Top 25 Icons of IP and the Financial Times 2015
Top 10 Legal Innovators in North America. Among other
qualifications, Mr. Sterne has an in-depth knowledge of our
intellectual property portfolio and patent strategies and is
considered a leader in best practices and board responsibilities
concerning intellectual property.
Director Independence
Although
our Common Stock is quoted on the OTCQB, we continue to follow the
rules of Nasdaq in determining if a director is
independent. The Board also consults with our counsel to
ensure that the Board’s determination is consistent with
those rules and all relevant securities and other laws and
regulations regarding the independence of
directors. Prior to our restructuring in 2018, the Board
affirmatively determined that Messrs. der Torossian, Hightower,
Metcalf, Newman, Rosenbaum, Sterne and Suh were independent
directors. After our restructuring, the Board has
affirmatively determined that Messrs. Newman, Rosenbaum,
Sterne and Titterton were independent directors.
Executive Officers
Our
current executive officers are as follows:
Name
|
|
Position with
our Company
|
Jeffrey
Parker
|
62
|
Chairman of the
Board and Chief Executive Officer (“CEO”)
|
Cynthia
Poehlman
|
52
|
Chief Financial
Officer and Corporate Secretary (“CFO”)
|
David
Sorrells
|
60
|
Chief Technical
Officer and Director (“CTO”)
|
Gregory
Rawlins
|
61
|
Chief Technical
Officer – Heathrow (“CTO -
Heathrow”)
|
The
background for Mr. Jeffrey Parker is included above under the
heading “Directors”.
Cynthia Poehlman
Cynthia
Poehlman has been our chief financial officer since June 2004 and
our corporate secretary since August 2007. From March 1994 to June
2004, Ms. Poehlman was our controller and our chief accounting
officer. Ms. Poehlman has been a certified public accountant in the
state of Florida since 1989.
David Sorrells
David
Sorrells has been our chief technical officer since September 1996
and served as our engineering manager from June 1990 to September
1996. He also served as a director of ours from January 1997 to
June 2018. Mr. Sorrells is one of the leading inventors of our core
technologies. He holds 190 U.S. patents and a number of
corresponding foreign patents.
Gregory Rawlins
Gregory
Rawlins has been the
chief technical officer for our Heathrow (Lake Mary) location since
July 2017. Prior to July 2017, Dr. Rawlins served as our chief
staff scientist since 2000 when we acquired Signal Technologies,
Inc., a wireless and integrated circuit design engineering company
that he founded in 1987 and where he served as chief executive
officer. Dr. Rawlins has received several IEEE awards including
Engineer of the Year in 1987, Entrepreneur of the Year in 1995, and
Lifetime Achievement Award in Engineering in 2011. Dr. Rawlins is a
named inventor on a number of our core patents.
Family Relationships
There
are no family relationships among our officers or
directors.
EXECUTIVE COMPENSATION
Summary Compensation Table
The
following table summarizes the total compensation of each of our
“named executive officers” as defined in Item 402(m) of
Regulation S-K (the “Executives”) for the fiscal years
ended December 31, 2018 and 2017. Given the complexity of
disclosure requirements concerning executive compensation, and in
particular with respect to the standards of financial accounting
and reporting related to equity compensation, there is a difference
between the compensation that is reported in this table versus that
which is actually paid to and received by the Executives. The
amounts in the Summary Compensation Table that reflect the full
grant date fair value of an equity award, do not necessarily
correspond to the actual value that has been realized or will be
realized in the future with respect to these awards.
(a)
|
(b)
|
|
|
|
|
|
|
|
|
Name and
Principal Position
|
|
|
|
|
|
|
|
|
|
Jeffrey Parker,
CEO
|
2018
|
$297,500
|
|
$-
|
$-
|
$-
|
$24,000
|
5
|
321,500
|
|
2017
|
325,000
|
|
-
|
198,000
|
31,012
|
24,000
|
5
|
578,012
|
Cynthia Poehlman,
CFO
|
2018
|
205,962
|
|
-
|
-
|
-
|
-
|
|
205,962
|
|
2017
|
225,000
|
|
-
|
99,000
|
31,012
|
750
|
6
|
355,762
|
David Sorrells,
CTO
|
2018
|
252,303
|
2
|
2,149
|
-
|
-
|
-
|
|
254,452
|
|
2017
|
275,625
|
|
1,003
|
-
|
31,012
|
2,535
|
6
|
310,175
|
John Stuckey, CMO 3
|
2018
|
175,696
|
|
-
|
-
|
-
|
7,692
|
3
|
183,388
|
|
2017
|
250,000
|
|
-
|
99,000
|
31,012
|
1,263
|
6
|
381,275
|
Gregory Rawlins,
CTO Heathrow
|
2018
|
228,846
|
4
|
-
|
-
|
-
|
-
|
|
228,846
|
|
2017
|
250,000
|
|
-
|
99,000
|
27,604
|
-
|
|
376,604
|
1
The amounts
represented in columns (e) and (f) represents the full grant date
fair value of equity awards in accordance with ASC
718. Refer to Note 12 to the consolidated financial
statements for the year ended December 31, 2018 included elsewhere
in this prospectus for the assumptions made in the valuation of
equity awards.
2
Includes $8,481
which represents the grant-date fair value of restricted stock
received by the executive in lieu of salary.
3
Mr. Stuckey’s
employment was terminated in August 2018. The amount reported in
column (g) represents amounts paid in connection with termination
of executive’s employment, including $7,215 which represents
the grant-date fair value of restricted stock received by the
executive in lieu of cash.
4
Includes $7,692
which represents the grant-date fair value of restricted stock
received by the executive in lieu of salary.
5
Represents an
automobile allowance in the amount of $24,000.
6
Represents the
dollar value of premiums paid by us for life insurance for the
benefit of the executive.
In
August 2018, each of our Executives agreed to a 20% reduction in
base salary in connection with our planned restructuring. In
addition, in 2018, we elected not to renew term life insurance
policies previously provided on behalf of certain of our
Executives. The Executives were provided the option to assume
premium payments and ownership of those policies.
We do
not have employment agreements with any of our Executives. We have
non-compete arrangements in place with all of our employees,
including our Executives, that impose post-termination restrictions
on (i) employment or consultation with competing companies or
customers, (ii) recruiting or hiring employees for a competing
company, and (iii) soliciting or accepting business from our
customers. We also have a tax-qualified defined contribution 401(k)
plan for all of our employees, including our Executives. We did not
make any employer contributions to the 401(k) plan in 2018 or
2017.
Outstanding Equity Awards at Fiscal Year End
The
following table summarizes information concerning the outstanding
equity awards, including unexercised options, unvested stock and
equity incentive awards, as of December 31, 2018 for each of our
Executives:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option
Awards
|
|
|
Number of
securities underlying unexercised options (#)
exercisable
|
|
Number of
securities underlying unexercised options (#)
unexercisable
|
Option Exercise
Price ($)
|
|
Option
Expiration Date
|
|
Name
|
|
(a)
|
|
(b)
|
(c)
|
|
(d)
|
|
Jeffrey
Parker
|
|
60,000
|
|
-
|
|
28.30
|
|
7/16/2019
|
|
|
|
20,000
|
|
-
|
|
1.98
|
|
8/15/2024
|
|
Cynthia
Poehlman
|
|
12,500
|
|
-
|
|
28.30
|
|
7/16/2019
|
|
|
|
20,000
|
|
-
|
|
1.98
|
|
8/15/2024
|
|
David
Sorrells
|
|
30,000
|
|
-
|
|
28.30
|
|
7/16/2019
|
|
|
|
20,000
|
|
-
|
|
1.98
|
|
8/15/2024
|
|
John
Stuckey
|
|
20,000
|
|
-
|
|
1.98
|
|
8/22/2019
|
|
Gregory
Rawlins
|
|
12,500
|
|
-
|
|
28.30
|
|
7/16/2019
|
|
|
|
20,000
|
|
-
|
|
1.98
|
|
8/15/2024
|
|
|
|
|
|
|
|
|
|
|
|
In
August 2019, the Board granted nonqualified stock options to three
of our Executives for the purchase of an aggregate of 7.75 million
shares at an exercise price of $0.17 per share under our 2019
Long-Term Incentive Plan. This grant included 6.0 million share
options for Mr. Jeffrey Parker, 1.0 million share options for Ms.
Poehlman, and 0.75 million share options for Mr. Rawlins. The
options vest in eight equal quarterly installments commencing
September 1, 2019, provided that such options will not be
exercisable unless and until we have sufficient authorized unissued
shares or treasury shares available for such exercise.
Director Compensation
Following
our Board restructuring in September 2018, the Board eliminated all
cash fees for Board and committee service. Prior to our
restructuring, our standard non-employee director compensation
program provided for cash retainers for service on the Board and
Board committees. Committee fees were structured in such a way as
to provide distinction between compensation for committee members
and chairpersons and between the responsibilities of the various
committees. Each non-employee director was entitled to an annual
cash retainer of $37,500. In addition, non-employee directors who
served on the audit committee received an annual cash retainer of
$7,500 ($15,000 for the committee chair). Non-employee directors
who served on the compensation committee received an annual cash
retainer of $5,000 ($10,000 for the committee chair). Non-employee
directors who served on the nominating and corporate governance
committee received an annual cash retainer of $2,500 ($5,000 for
the committee chair).
Two of
our directors, Messrs. Newman and Rosenbaum, who were appointed in
December 2016 waived all cash fees for director and committee
service through December 2018 and each received 50,000 share
options and 50,000 RSUs. Twenty percent of the equity awards vested
upon grant and the remaining portion of the awards vested in eight
equal quarterly increments through December 2018.
Our
standard director compensation program generally includes annual
equity-based compensation to our non-employee directors in the form
of RSUs, nonqualified stock options, or a combination thereof. Upon
completion of the Board restructuring in September 2018, each of
the non-employee directors received 125,000 nonqualified share
options at an exercise price of $0.60 per share. The options vest
in four equal increments over a one year period.
In
August 2019, each of the non-employee directors received 800,000
nonqualified share options at an exercise price of $0.17 per share.
The options vest in eight equal quarterly installments commencing
September 1, 2019, provided that such options will not be
exercisable unless and until we have sufficient authorized unissued
shares or treasury shares available for such exercise. Director
equity compensation awards are forfeited if the director resigns or
is removed from the Board for cause prior to the vesting
date.
We
reimburse our non-employee directors for their reasonable expenses
incurred in attending meetings and we encourage participation in
relevant educational programs for which we reimburse all or a
portion of the costs incurred for these purposes.
Directors
who are also our employees are not compensated for serving on our
Board.
The
following table summarizes the compensation of our current and
former non-employee directors for the year ended December 31,
2018.
Name
|
Fees Earned or
Paid in Cash
($) 1
|
|
|
|
(a)
|
|
|
|
|
Frank Newman
3
|
-
|
-
|
57,621
|
57,621
|
Paul Rosenbaum
3
|
-
|
-
|
57,621
|
57,621
|
Robert Sterne
4
|
26,667
|
-
|
57,621
|
84,288
|
Lewis Titterton
5
|
-
|
-
|
57,621
|
57,621
|
Papken der
Torossian 6
|
36,667
|
-
|
-
|
36,667
|
William Hightower
6
|
33,333
|
-
|
-
|
33,333
|
John Metcalf
7
|
38,333
|
-
|
-
|
38,333
|
Nam Suh
7
|
30,000
|
-
|
-
|
30,000
|
1
Amount represents fees earned, but unpaid for 2018
annual Board and committee retainers.
2
The amounts
represented in column (d) represent the full grant date fair value
of share-based awards in accordance with ASC 718. Refer
to Note 12 of the financial statements included elsewhere in this
prospectus for the assumptions made in the valuation of stock
awards.
3
At December 31,
2018, Messrs. Newman and Rosenbaum each have an aggregate of
175,000 nonqualified stock options outstanding, of which 81,250 are
exercisable.
4
At December 31,
2018, Mr. Sterne has 247,546 nonqualified stock options
outstanding, of which 153,796 are exercisable.
5
At December 31,
2018, Mr. Titterton has 125,000 nonqualified stock options
outstanding, of which 31,250 are exercisable.
6
At December 31,
2018, Messrs. der Torossian, and Hightower each has 25,811
nonqualified stock options outstanding and
exercisable.
7
At December 31,
2018, Messrs. Metcalf and Suh each has 74,178 nonqualified stock
options outstanding and exercisable.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The
following table sets forth certain information as of August 15,
2019 with respect to the stock ownership of (i) those persons or
groups who beneficially own more than 5% of our common stock, (ii)
each of our directors, (iii) each of our executive officers, and
(iv) all of our directors and executive officers as a group (based
upon information furnished by those persons).
As of
August 15, 2019, 31,730,872 shares of our common stock were issued
and outstanding.
Name of
Beneficial Owner
|
|
Amount and
Nature of Beneficial
Ownership
|
|
Percent
of Class1
|
EXECUTIVE OFFICERS AND DIRECTORS
|
|
|
|
|
Jeffrey
Parker 10
|
|
607,270
|
2
|
1.91%
|
Cynthia
Poehlman 10
|
|
82,693
|
3
|
*
|
Gregory
Rawlins 10
|
|
100,197
|
4
|
*
|
David
Sorrells 10
|
|
129,291
|
5
|
*
|
Frank
Newman 10
|
|
227,500
|
6
|
*
|
Paul
Rosenbaum 10
|
|
900,077
|
7
|
2.80%
|
Robert
Sterne 10
|
|
295,811
|
8
|
*
|
All
directors, director nominees and executive officers as a group (7
persons)
|
|
2,342,839
|
9
|
7.15%
|
* Less
than 1%
1 Percentage
is calculated based on all outstanding shares of common stock plus,
for each person or group, any shares of common stock that the
person or the group has the right to acquire within 60 days
pursuant to options, warrants, conversion privileges or other
rights. Unless otherwise indicated, each person or group has sole
voting and dispositive power over all such shares of common
stock.
2 Includes
80,000 shares of common stock issuable upon currently exercisable
options, 403,324 shares held by Mr. Parker directly, 117,259 shares
held by Jeffrey Parker and Deborah Parker Joint Tenants in Common,
over which Mr. Parker has shared voting and dispositive power, and
6,687 shares owned of record by Mr. Parker’s child over which
he disclaims ownership. Excludes 6,000,000 shares of common stock
issuable upon options that may become exercisable in the
future.
3 Includes
32,500 shares of common stock issuable upon currently exercisable
options. Excludes 1,000,000 shares of common stock issuable upon
options that may become exercisable in the future.
4 Includes
32,500 shares of common stock issuable upon currently exercisable
options. Excludes 750,000 shares of common stock issuable upon
options that may become exercisable in the future.
5 Includes
50,000 shares of common stock issuable upon currently exercisable
options.
6 Includes
175,000 shares of common stock issuable upon currently exercisable
options and excludes 800,000 shares of common stock issuable upon
options that may become exercisable in the future.
7 Includes
175,000 shares of common stock issuable upon currently exercisable
options and 250,000 shares of common stock issuable upon conversion
of convertible notes and excludes 800,000 shares of common stock
issuable upon options that may become exercisable in the
future.
8 Includes
247,546 shares of common stock issuable upon currently exercisable
options and excludes 800,000 shares of common stock issuable upon
options that may become exercisable in the future.
9 Includes
792,546 shares of common stock issuable upon currently exercisable
options and 250,000 shares of common stock issuable upon conversion
of convertible notes held by directors and officers and excludes
10,150,000 shares of common stock issuable upon options that may
become exercisable in the future (see notes 2, 3, 4, 5, 6, 7, and 8
above).
10 The
person’s address is 9446 Philips Highway, Suite 5A,
Jacksonville, FL 32256.
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
We paid
approximately $22,000, $30,000 and $30,000 for the six-months ended
June 30, 2019 and the years ended 2018 and 2017, respectively for
patent-related legal services to SKGF, of which Robert Sterne, is a
partner. In addition, we paid approximately $59,000 and $66,000 for
the years ended 2018 and 2017, respectively for principal and
interest on an unsecured note payable to SKGF (the “SKGF
Note”). We made no payments on the SKGF Note for the six
months ended June 30, 2019. The SKGF Note was issued in 2016 to
convert outstanding unpaid legal fees to an unsecured promissory
note. The SKGF Note was amended in January 2018 and August 2018 to
defer principal payments. In March 2019, we amended the SKGF Note
to provide for a waiver of past payment defaults, a decrease in the
interest rate from 8% per annum to 4% per annum, an extension of
the maturity date from March 2020 to April 2022, and a modification
of payment terms. This amendment constituted a troubled debt
restructuring and has been accounted for on a prospective
basis from the date of the amendment. As of June 29, 2019, we
amended the SKGF Note to provide for a postponement of past payment
defaults and future payments until October 2019. As of June 30,
2019, we were in compliance of all terms of the agreement. At June
30, 2019, the outstanding balance of the note, including unpaid
interest is approximately $862,000.
On
September 10, 2018, we sold an aggregate of $400,000 in
promissory notes, convertible into shares of our common stock at a
fixed conversion price of $0.40 to related parties on the same
terms as other convertible notes sold in the same transaction.
Jeffrey Parker, our chief executive officer and chairman of the
Board, Paul Rosenbaum, one of our directors since December 2016,
and incoming independent director, Lewis Titterton, each purchased
a convertible note with a face value of $100,000. In addition,
Stacie Wilf, sister to Jeffrey Parker, purchased a convertible note
with a face value of $100,000.
On
March 26, 2018, three of our directors purchased an aggregate of
200,000 shares of our common stock in an unregistered sale of
equity securities at a purchase price of $0.83 per share, which
represented the closing bid price of our common stock on the
purchase date.
In
February 2017, one of our directors, Mr. Paul Rosenbaum, purchased
80,510 shares of our common stock in an unregistered sale of equity
securities at a purchase price of $2.11 per share, which
represented the closing bid price of our common stock on the
purchase date.
SELLING STOCKHOLDERS
This
prospectus relates to the offer and sale by the selling
stockholders from time to time of up to an aggregate of 18,014,164
shares of Common Stock consisting of (i) 15,589,164 shares of
Common Stock issuable upon conversion of, and for the payment of
interest from time to time at our option for, the Notes, (ii)
625,000 shares issued in conjunction with the Fisher Consulting
Agreement, and (iii) 1,800,000 shares of Common Stock issuable upon
the exercise of the Park Consulting Warrant.
When we
refer to the “selling stockholders” in this prospectus,
we mean the persons and entities listed in the table below, and
each of their respective pledgees, donees, permitted transferees,
assignees, successors and others who later come to hold any of such
selling stockholder’s interests in shares of our Common Stock
other than through a public sale.
Other
than as described in this prospectus, the selling stockholders have
not within the past three years had any position, office or other
material relationship with us or any of our predecessors or
affiliates other than as a holder of our securities. None of the
selling stockholders are broker-dealers or affiliates of a
broker-dealer.
The table below presents information regarding the selling
stockholders, the shares of Common Stock that they may sell or
otherwise dispose of from time to time under this prospectus and
the number of shares and percentage of our outstanding shares of
Common Stock each of the selling stockholders will own assuming all
of the shares covered by this prospectus are sold by the selling
stockholders.
We do not know when or in what amounts the selling stockholders may
sell or otherwise dispose of the shares of Common Stock offered
hereby. The selling stockholders might not sell or dispose of any
or all of the shares covered by this prospectus or may sell or
dispose of some or all of the shares other than pursuant to this
prospectus. Because the selling stockholders may not sell or
otherwise dispose of some or all of the shares covered by this
prospectus and because there are currently no agreements,
arrangements or understandings with respect to the sale or other
disposition of any of the shares, we cannot estimate the number of
shares that will be held by the selling stockholders after
completion of the offering. However, for purposes of this table, we
have assumed that all of the shares of Common Stock covered by this
prospectus will be sold by the selling stockholders.
|
Beneficial Ownership
Prior to This Offering 1
|
|
Beneficial Ownership After
Offering
|
Selling Stockholder
|
|
|
|
|
|
|
Mark
Fisher
|
1,764,309
|
3
|
4.99%
|
4,239,036
|
519,309
|
1.44%
|
Barry
J. Charles
|
250,000
|
|
0.78%
|
340,910
|
-
|
-
|
Amanda
Engel
|
25,000
|
|
0.08%
|
34,091
|
-
|
-
|
Lindsey
Engel
|
25,000
|
|
0.08%
|
34,091
|
-
|
-
|
Ryan
Engel
|
200,000
|
|
0.62%
|
272,728
|
-
|
-
|
Christopher
Engel
|
1,687,728
|
4
|
4.99%
|
2,072,728
|
700,000
|
2.07%
|
Jamie
Jo Harris Investment Trust
|
830,000
|
|
2.59%
|
340,910
|
580,000
|
1.81%
|
Nicole
Goldberg Investment Trust
|
830,000
|
|
2.59%
|
340,910
|
580,000
|
1.81%
|
Mel
Harris
|
1,616,820
|
5
|
4.99%
|
681,820
|
1,160,000
|
3.58%
|
Walter
S. Grossman
|
338,000
|
|
1.05%
|
340,910
|
88,000
|
0.27%
|
Lewis
H. Titterton
|
1,452,082
|
6 |
4.53%
|
340,910
|
1,202,082
|
3.71%
|
William
Walters
|
261,000
|
|
0.81%
|
340,910
|
11,000
|
0.03%
|
Lloyd
A. Moriber
|
500,000
|
|
1.54%
|
700,000
|
-
|
0.00%
|
Stephen
Hanson
|
1,250,000
|
|
3.77%
|
1,447,369
|
-
|
0.00%
|
Gem
Partners LP
|
1,946,237
|
7
|
4.99%
|
7,236,843
|
1,602,237
|
4.07%
|
(1)
The information in the table is based on
information supplied to us by the selling stockholders. The
percentages of ownership are calculated based on 31,730,872 shares
of Common Stock outstanding as of August 15, 2019. Beneficial
ownership is determined in accordance with Section 13(d) of the
Exchange Act, and generally includes shares over which the selling
stockholder has voting or dispositive power, including any shares
that the selling stockholder has the right to acquire within 60
days of the date of this prospectus. Unless otherwise indicated,
the selling stockholders have sole voting and dispositive control
over the shares of Common Stock.
(2)
The
shares of Common Stock offered by this prospectus assumes
conversion in full of the entire outstanding principal amount of
the Tranche 1 Notes at $0.10 per share, conversion in full of the
entire outstanding principal amount of the Tranche 2 Notes at $0.08
per share and assumes that interest paid through maturity will be
paid in shares of Common Stock at a weighted average price of $0.14
per share.
(3)
Beneficial
ownership includes 625,000 shares acquired pursuant to the Fisher
Consulting Agreement and 620,000 shares underlying the Tranche 1
Notes held by Fisher and excludes an aggregate of 2,130,000 shares
underlying the Tranche 1 Notes and Tranche 2 Notes held by Fisher
that are not exercisable within 60 days due to exercise
limitations.
(4)
Beneficial
ownership includes 25,000 shares underlying the Tranche 1 Notes
held by Christopher Engel (“Engel”), 50,000 shares
underlying Tranche 1 Notes held by Amanda Engel and Lindsey Engel,
over which Engel has voting and dispositive control, and 715,000
shares underlying the Park Consulting Warrant over which Engel has
sole voting and dispositive control and excludes 1,085,000 shares
underlying the Park Consulting Warrant that are not exercisable
within 60 days due to exercise limitations.
(5)
Mel Harris as trustee, has sold voting and
dispositive control over shares held by the Jamie Jo Harris
Investment Trust and the Nicole Goldberg Investment Trust
(collectively, “the Trusts”). Mr. Harris’
beneficial ownership includes an aggregate of 1,160,000 shares held
by the Trusts, and an aggregate of 456,820 shares underlying the
Tranche 1 Notes held by the Trusts and excludes an aggregate of
225,000 shares underlying the Tranche 1 Notes held by the Trusts
that are not exercisable within 60 days due to exercise
limitations.
(6)
Mr.
Titterton’s beneficial ownership includes 62,500 shares of
Common Stock issuable upon currently exercisable options, 250,000
shares of Common Stock underlying convertible notes dated September
10, 2018 and 250,000 shares of Common Stock underlying the Tranche
1 Notes.
(7)
GEM Investment
Advisors, LLC (“GEM Advisors”) is the general partner
of GEM Partners LLC (“GEM”) and Flat Rock Partners LP
(“FlatRock”). Mr. Daniel Lewis is the controlling
person of GEM Advisors. GEM Advisors and Mr. Lewis have shared
voting and dispositive power. Beneficial ownership includes 4,899
shares held by FlatRock, 6,600 shares held by Mr. Lewis, and
1,000,000 shares underlying convertible notes dated September 19,
2019 held by GEM and excludes 5,906,000 shares underlying the
Tranche 2 Notes held by GEM that are not exercisable within 60 days
due to exercise limitations.
PLAN OF DISTRIBUTION
Each selling stockholder and any of their pledgees, assignees and
successors-in-interest may, from time to time, sell any or all of
the shares of Common Stock covered hereby on the principal trading
market for the Common Stock or any other stock exchange, market or
trading facility on which the Common Stock is traded or in private
transactions. These sales may be at fixed or negotiated prices. A
selling stockholder may use any one or more of the following
methods when selling securities:
●
ordinary
brokerage transactions and transactions in which the broker dealer
solicits purchasers;
●
block
trades in which the broker dealer will attempt to sell the
securities as agent but may position and resell a portion of the
block as principal to facilitate the transaction;
●
purchases
by a broker dealer as principal and resale by the broker dealer for
its account;
●
an
exchange distribution in accordance with the rules of the
applicable exchange;
●
privately
negotiated transactions;
●
settlement
of short sales;
●
in
transactions through broker dealers that agree with the selling
stockholders to sell a specified number of such securities at a
stipulated price per security;
●
through
the writing or settlement of options or other hedging transactions,
whether through an options exchange or otherwise;
●
a
combination of any such methods of sale; or
●
any
other method permitted pursuant to applicable law.
In
order to comply with the securities laws of certain states, if
applicable, the shares may be sold only through registered or
licensed brokers or dealers. In addition, in certain states, the
shares may not be sold unless they have been registered or
qualified for sale in the state or an exemption from the
registration or qualification requirement is available and complied
with.
Further,
because our Common Stock is classified as a “penny
stock”, broker-dealers who make a market in our Common Stock
will be subject to additional sales practice requirements for
selling our Common Stock to persons other than established
customers and accredited investors. For instance, the broker-dealer
must make a special suitability determination for the purchaser and
receive the purchaser’s written agreement to the transaction
prior to the sale.
The
selling stockholders may also sell shares of Common Stock under
Rule 144 promulgated under the Securities Act, if available, rather
than under this prospectus. In addition, the selling stockholders
may transfer the shares of Common Stock by other means not
described in this prospectus.
Broker dealers engaged by the selling stockholders may arrange for
other brokers dealers to participate in sales. Broker dealers may
receive commissions or discounts from the selling stockholders (or,
if any broker dealer acts as agent for the purchaser of securities,
from the purchaser) in amounts to be negotiated, but, except as set
forth in a supplement to this prospectus, in the case of an agency
transaction not in excess of a customary brokerage commission in
compliance with FINRA Rule 2440; and in the case of a principal
transaction a markup or markdown in compliance with FINRA
IM-2440.
In connection with the sale of the securities or interests therein,
the selling stockholders may enter into hedging transactions with
broker-dealers or other financial institutions, which may in turn
engage in short sales of the securities in the course of hedging
the positions they assume. The selling stockholders may also sell
securities short and deliver these securities to close out their
short positions, or loan or pledge the securities to broker-dealers
that in turn may sell these securities. The selling stockholders
may also enter into option or other transactions with
broker-dealers or other financial institutions or create one or
more derivative securities which require the delivery to such
broker-dealer or other financial institution of securities offered
by this prospectus, which securities such broker-dealer or other
financial institution may resell pursuant to this prospectus (as
supplemented or amended to reflect such transaction).
The selling stockholders and any broker-dealers or agents that are
involved in selling the securities may be deemed to be
“underwriters” within the meaning of the Securities Act
in connection with such sales, and therefore will be required to
comply with the prospectus delivery requirements of the Securities
Act, including Rule 172 thereunder. Additionally, if the selling
stockholders and/or their broker-dealers or agents are deemed to be
underwriters, any commissions received by such broker-dealers or
agents and any profit on the resale of the securities purchased by
them may be deemed to be underwriting commissions or discounts
under the Securities Act. Each selling stockholder has informed us
that it does not have any written or oral agreement or
understanding, directly or indirectly, with any person to
distribute the securities.
We are required to pay certain fees and expenses incurred by us
incident to the registration of the securities. We have also agreed
to provide indemnification and contribution to the selling
stockholders against certain civil liabilities, including
liabilities under the Securities Act.
We agreed to keep this prospectus effective until the earlier of
(i) the date on which the securities may be resold by the selling
stockholders without registration and without regard to any volume
or manner of sale limitations by reason of Rule 144, without the
requirement for us to be in compliance with the current public
information requirements under Rule 144 or any other rule of
similar effect or (ii) all of the securities have been sold
pursuant to this prospectus or Rule 144 or any other rule of
similar effect. The securities will be sold only through registered
or licensed brokers or dealers if required under applicable state
securities laws. In addition, in certain states, the securities
covered hereby may not be sold unless they have been registered or
qualified for sale in the applicable state or an exemption from the
registration or qualification requirement is available and is
complied with.
Under applicable rules and regulations under the Exchange Act, any
person engaged in the distribution of the securities may not
simultaneously engage in market making activities with respect to
our Common Stock for the applicable restricted period, as defined
in Regulation M, prior to the commencement of the distribution. In
addition, the selling stockholders will be subject to applicable
provisions of the Exchange Act and the rules and regulations
thereunder, including Regulation M, which may limit the timing of
purchases and sales of Common Stock by the selling stockholders or
any other person. We will make copies of this prospectus available
to the selling stockholders and have informed them of the need to
deliver a copy of this prospectus to each purchaser at or prior to
the time of the sale (including by compliance with Rule 172 under
the Securities Act).
DESCRIPTION OF SECURITIES
The following description of our capital stock is a summary only
and is qualified by reference to our Amended and Restated
Certificate of Incorporation and Amended and Restated Bylaws, which
are included herewith as Exhibits 3.1 through 3.6,
respectively.
Common Stock
We are authorized to issue up to 75,000,000 shares of Common Stock,
$0.01 par value per share. As of August 15, 2019 there were
31,730,872 shares of our Common Stock outstanding. Holders of our
Common Stock are entitled to one vote per share on all matters
submitted to a vote of stockholders and may not cumulate votes for
the election of directors. Common Stockholders have the right to
receive dividends when, as, and if declared by the Board from funds
legally available therefore. Holders of Common Stock have no
preemptive rights and have no rights to convert their Common Stock
into any other securities.
Shareholder Protection Rights Plan
We have a Shareholder Protection Rights Agreement (“Rights
Agreement”), originally adopted on November 21, 2005 and
amended on November 20, 2015, pursuant to which we issued, on
November 29, 2005, as a dividend, one right to acquire a fraction
of a share of Series E Preferred Stock for each then outstanding
share of Common Stock. Each share of Common Stock issued by us
after such date also has included, and any subsequent shares of
Common Stock issued by us prior to the Separation Time (as defined
in the Rights Agreement) will include, an attached right. The
following description of the Rights Agreement, and any description
of the Rights Agreement included in a prospectus supplement, may
not be complete and is subject to and qualified in its entirety by
reference to the terms and provisions of the Rights
Agreement.
The principal objective of the Rights Agreement is to cause someone
interested in acquiring us to negotiate with our Board rather than
launch an unsolicited or hostile bid. The Rights Agreement subjects
a potential acquirer to substantial voting and economic
dilution.
The rights initially are not exercisable and trade with our Common
Stock. In the future, the rights may become exercisable with
various provisions that may discourage a takeover bid. If a
potential acquirer initiates a takeover bid or becomes the
beneficial owner of 15% or more of our Common Stock, the rights
will separate from the Common Stock. Upon separation, the holders
of the rights may exercise their rights at an exercise price of
$14.50 per right (the “Exercise Price”), subject to
adjustment and payable in cash. Additionally, the rights have what
are known as “flip-in” and “flip-over”
provisions that could make any acquisition of us more costly to the
potential acquirer. The “flip-in” provision provides
that, in the event a potential acquirer acquires 15% or more of the
outstanding shares of our Common Stock, upon payment of the
exercise price, the holders of the rights will receive from us that
number of shares of Common Stock having an aggregate market price
equal to twice the Exercise Price, as adjusted. The
“flip-over” provision allows the holder to purchase
that number of shares of common/voting equity of a successor
entity, if we are not the surviving corporation in a business
combination, with an aggregate market price equal to twice the
Exercise Price.
We have the right to substitute for any of our shares of Common
Stock that we are obligated to issue, shares of Series E Preferred
Stock at a ratio of one thousandth of a share of Series E Preferred
Stock for each share of Common Stock.
The rights may be redeemed upon approval of the Board at a
redemption price of $0.01 per right. The Rights Agreement expires
on November 20, 2020.
Classified Board; Director Nominations; Special
Meetings
Our Board is divided into three classes, with only one class of
directors elected at each annual meeting, and our shareholders may
remove our directors only for cause. Nominations for our Board may
be made by our Board or by any holder of Common Stock. A
shareholder entitled to vote for the election of directors may
nominate a person for election as director only if the shareholder
provides written notice of his nomination to our secretary not
later than 120 days in advance of the same day and month that our
proxy statement was released to shareholders in connection with the
previous year’s annual meeting of shareholders or, if no
annual meeting was held in the previous year, then by the end of
the fiscal year to which the annual meeting in which the nomination
will be made relates. A special meeting of our shareholders may be
called only by our Board or our chief executive officer. These
provisions and the Board’s right to issue shares of our
preferred stock from time to time, in one or more classes or series
without stockholder approval, are intended to enhance the
likelihood of continuity and stability in the composition of the
policies formulated by our Board. These provisions are also
intended to discourage some tactics that may be used in proxy
fights.
LEGAL MATTERS
The
legality of the Common Stock offered by this prospectus has been
passed upon by Graubard Miller, New York, New York. Graubard Miller
owns shares of our Common Stock constituting less than 1% of our
outstanding shares of Common Stock.
EXPERTS
The
financial statements as of December 31, 2018 and for the year ended
December 31, 2018 included in this Prospectus and in the
Registration Statement have been so included in reliance on the
report (which contains an explanatory paragraph relating to our
ability to continue as a going concern as described in Note 2 to
the consolidated financial statements) of BDO USA, LLP, an
independent registered public accounting firm, given on the
authority of said firm as experts in auditing and
accounting.
The
financial statements as of December 31, 2017 and for the year ended
December 31, 2017 included in this Prospectus have been so included
in reliance on the report (which contains an explanatory paragraph
relating to our ability to continue as a going concern as described
in Note 2 to the consolidated financial statements) of
PricewaterhouseCoopers LLP, an independent registered public
accounting firm, given on the authority of said firm as experts in
auditing and accounting.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and current reports, proxy statements and
other information with the SEC. Our SEC filings are available to
the public over the Internet at the SEC’s web site at
http://www.sec.gov. Our Common Stock is traded on the OTCQB
Market.
We have
filed with the SEC a Registration Statement on Form S-1 relating to
the Common Stock to be sold in this offering. The registration
statement, including the attached exhibits and schedules, contains
additional relevant information about us and our capital stock.
This prospectus does not contain all of the information set forth
in the Registration Statement and the exhibits and schedules
thereto. For further information about us and our Common Stock, you
should refer to the Registration Statement, including the exhibits
and schedules thereto. Statements contained in this prospectus as
to the contents of any contract or other document referred to are
not necessarily complete and in each instance, if such contract or
document is filed as an exhibit, reference is made to the copy of
such contract or other document filed as an exhibit to the
Registration Statement, each statement being qualified in all
respects by such reference.
Index
to Financial Statements
|
|
|
|
|
CONDENSED
CONOLIDATED INTERIM FINANCIAL STATEMENTS:
|
|
Condensed
Consolidated Balance Sheets – June 30, 2019 (unaudited) and
December 31, 2018
|
F-2
|
Condensed Consolidated Statements of Comprehensive Loss
(unaudited) - for the three and six months ended June 30, 2019 and
2018
|
F-3
|
Condensed Consolidated Statements of Shareholders’
Deficit (unaudited) - for the six months ended June 30, 2019 and
2018
|
F-4
|
Condensed
Consolidated Statements of Cash Flows (unaudited)- for the three
and six months ended June 30, 2019 and 2018
|
F-5
|
Notes
to Condensed Consolidated Financial Statements
(unaudited)
|
F-6
|
|
|
|
|
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM (for the year
ended December 31, 2018)
|
F-16
|
|
|
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM (for the year
ended December 31, 2017)
|
F-17
|
|
|
CONSOLIDATED
FINANCIAL STATEMENTS:
|
|
Consolidated
Balance Sheets - December 31, 2018 and 2017
|
F-18
|
Consolidated
Statements of Comprehensive Loss - for the years ended
December 31, 2018 and 2017
|
F-19
|
Consolidated
Statements of Shareholders’ Deficit - for the years ended
December 31, 2018 and 2017
|
F-20
|
Consolidated
Statements of Cash Flows - for the years ended December 31,
2018 and 2017
|
F-21
|
Notes
to Consolidated Financial Statements - December 31, 2018 and
2017
|
F-22
|
|
|
SUPPLEMENTARY
DATA:
|
|
Not
applicable
|
|
PARKERVISION,
INC.
CONDENSED
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(in
thousands, except par value data)
|
June 30,
|
December 31,
|
|
2019
|
2018
|
CURRENT
ASSETS:
|
|
|
Cash
and cash equivalents
|
$63
|
$1,527
|
Accounts
receivable, net
|
1
|
2
|
Finished
goods inventories, net
|
58
|
98
|
Prepaid
expenses
|
637
|
538
|
Other
current assets
|
-
|
55
|
Held
for sale assets
|
50
|
65
|
Total
current assets
|
809
|
2,285
|
|
|
|
Property
and equipment, net
|
96
|
129
|
Operating
lease right-of-use assets
|
364
|
-
|
Intangible
assets, net
|
3,341
|
3,902
|
Other
assets, net
|
16
|
15
|
Total
assets
|
$4,626
|
$6,331
|
|
|
|
CURRENT
LIABILITIES:
|
|
|
Accounts
payable
|
$1,087
|
$655
|
Accrued
expenses:
|
|
|
Salaries
and wages
|
128
|
122
|
Professional
fees
|
597
|
493
|
Statutory
court costs
|
424
|
115
|
Other
accrued expenses
|
574
|
448
|
Related
party note payable, current portion
|
108
|
37
|
Notes
payable
|
1,825
|
2,400
|
Operating
lease liabilities, current portion
|
264
|
86
|
Total
current liabilities
|
5,007
|
4,356
|
|
|
|
LONG-TERM
LIABILITIES:
|
|
|
Secured
contingent payment obligation
|
24,734
|
25,557
|
Convertible
notes, net
|
2,444
|
837
|
Related
party note payable, net of current portion
|
754
|
799
|
Operating
lease liabilities, net of current portion
|
373
|
91
|
Other
long term liabilities
|
-
|
1
|
Total
long-term liabilities
|
28,305
|
27,285
|
Total
liabilities
|
33,312
|
31,641
|
|
|
|
COMMITMENTS
AND CONTINGENCIES
|
|
|
|
|
|
SHAREHOLDERS'
DEFICIT:
|
|
|
Common
stock, $.01 par value, 75,000 shares authorized, 31,731 and
28,677 shares issued and outstanding at June 30, 2019
and December 31, 2018, respectively
|
317
|
287
|
Warrants
outstanding
|
1,453
|
1,810
|
Additional
paid-in capital
|
365,530
|
364,885
|
Accumulated
deficit
|
(395,986)
|
(392,292)
|
Total
shareholders' deficit
|
(28,686)
|
(25,310)
|
Total
liabilities and shareholders' deficit
|
$4,626
|
$6,331
|
The
accompanying notes are an integral part of these unaudited
condensed consolidated financial statements.
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,
|
|
2019
|
2018
|
2019
|
2018
|
Product
revenue
|
$25
|
$38
|
$35
|
$115
|
Cost
of sales
|
(25)
|
(31)
|
(35)
|
(84)
|
Inventory
impairment charge
|
-
|
(42)
|
-
|
(42)
|
Gross
margin
|
-
|
(35)
|
-
|
(11)
|
|
|
|
|
|
Research
and development expenses
|
-
|
1,001
|
334
|
1,875
|
Selling,
general and administrative expenses
|
1,851
|
2,902
|
4,007
|
5,879
|
Total
operating expenses
|
1,851
|
3,903
|
4,341
|
7,754
|
|
|
|
|
|
Interest
and other income
|
-
|
-
|
-
|
2
|
Interest
expense
|
(76)
|
(18)
|
(138)
|
(34)
|
Change
in fair value of secured contingent
payment obligation
|
365
|
(538)
|
823
|
(987)
|
Total
interest and other
|
289
|
(556)
|
685
|
(1,019)
|
|
|
|
|
|
Net
loss
|
(1,562)
|
(4,494)
|
(3,656)
|
(8,784)
|
|
|
|
|
|
Other
comprehensive loss, net of tax
|
-
|
-
|
-
|
-
|
|
|
|
|
|
Comprehensive
loss
|
$(1,562)
|
$(4,494)
|
$(3,656)
|
$(8,784)
|
|
|
|
|
|
Basic
and diluted net loss per common share
|
$(0.05)
|
$(0.18)
|
$(0.12)
|
$(0.39)
|
|
|
|
|
|
Weighted
average common shares outstanding
|
30,888
|
24,564
|
30,042
|
22,672
|
The
accompanying notes are an integral part of these unaudited
condensed consolidated financial statements.
PARKERVISION,
INC.
CONDENSED
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ DEFICIT
(UNAUDITED)
(in
thousands)
|
Common Stock, Par Value
|
Warrants Outstanding
|
Additional Paid-in Capital
|
Accumulated Deficit
|
Total Shareholders' Deficit
|
Balance as of December 31, 2018
|
$287
|
$1,810
|
$364,885
|
$(392,292)
|
$(25,310)
|
Cumulative
effect of change in accounting principle
|
-
|
-
|
-
|
(38)
|
(38)
|
Issuance
of common stock upon exercise of warrants
|
15
|
(357)
|
357
|
-
|
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
|
$1,453
|
$365,385
|
$(394,424)
|
$(27,280)
|
Issuance
of common stock for services
|
6
|
-
|
54
|
-
|
60
|
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
|
$1,453
|
$365,530
|
$(395,986)
|
$(28,686)
|
|
Common Stock, Par Value
|
Warrants Outstanding
|
Additional Paid-in Capital
|
Accumulated Deficit
|
Total Shareholders' Deficit
|
Balance as of December 31, 2017
|
$212
|
$826
|
$359,141
|
$(371,423)
|
$(11,244)
|
Issuance
of common stock and warrants in public and private offerings, net
of issuance costs
|
25
|
-
|
2,227
|
-
|
2,252
|
Share-based
compensation, net of shares withheld for taxes
|
1
|
-
|
362
|
-
|
363
|
Comprehensive
loss for the period
|
-
|
-
|
-
|
(4,290)
|
(4,290)
|
Balance as of March 31, 2018
|
238
|
826
|
361,730
|
(375,713)
|
(12,919)
|
Expiration
of warrants
|
-
|
(491)
|
491
|
-
|
-
|
Issuance
of common stock and warrants in public and private offerings, net
of issuance costs
|
20
|
-
|
1,103
|
-
|
1,123
|
Share-based
compensation, net of shares withheld for taxes
|
1
|
-
|
347
|
-
|
348
|
Comprehensive
loss for the period
|
-
|
-
|
-
|
(4,494)
|
(4,494)
|
Balance as of June 30, 2018
|
$259
|
$335
|
$363,671
|
$(380,207)
|
$(15,942)
|
The
accompanying notes are an integral part of these unaudited
condensed consolidated financial statements.
PARKERVISION,
INC.
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(in
thousands)
|
Three Months Ended
|
Six Months Ended
|
|
June 30,
|
June 30,
|
|
2019
|
2018
|
2019
|
2018
|
CASH
FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
|
Net
loss
|
$(1,562)
|
$(4,494)
|
$(3,656)
|
$(8,784)
|
Adjustments
to reconcile net loss to net cash used in operating
activities:
|
|
|
|
|
Depreciation
and amortization
|
199
|
312
|
411
|
633
|
Share-based
compensation
|
48
|
348
|
115
|
711
|
Noncash
lease expense
|
101
|
-
|
199
|
-
|
(Gain)
loss on changes in fair value of secured contingent payment
obligation
|
(365)
|
538
|
(823)
|
987
|
Loss
on disposal of equipment and other assets
|
221
|
-
|
215
|
-
|
Inventory
impairment charges
|
-
|
42
|
-
|
42
|
Changes
in operating assets and liabilities:
|
|
|
|
|
Accounts
receivable
|
1
|
(2)
|
1
|
16
|
Finished
goods inventories
|
26
|
(14)
|
40
|
(213)
|
Prepaid
expenses and other assets
|
(41)
|
(199)
|
15
|
(4)
|
Accounts
payable and accrued expenses
|
524
|
701
|
1,081
|
499
|
Operating
lease liabilities and deferred rent
|
(29)
|
(7)
|
(148)
|
(13)
|
Total
adjustments
|
685
|
1,719
|
1,106
|
2,658
|
Net
cash used in operating activities
|
(877)
|
(2,775)
|
(2,550)
|
(6,126)
|
|
|
|
|
|
CASH
FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
|
Proceeds
from redemption of available-for-sale securities
|
-
|
6
|
-
|
26
|
Proceeds
from sale of fixed assets
|
9
|
-
|
23
|
-
|
Purchases
of property and equipment
|
-
|
-
|
-
|
(5)
|
Payments
for patent costs and other intangible assets
|
(9)
|
(4)
|
(17)
|
(4)
|
Net
cash provided by investing activities
|
-
|
2
|
6
|
17
|
|
|
|
|
|
CASH
FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
Net
proceeds from issuance of common stock and warrants in public
and private offerings
|
-
|
1,123
|
-
|
3,375
|
Net
proceeds from exercise of options and warrants
|
-
|
-
|
15
|
-
|
Net
proceeds from debt financings
|
565
|
-
|
1,865
|
-
|
Principal
payments on long-term debt
|
-
|
(21)
|
(800)
|
(21)
|
Proceeds
from contingent payment obligation
|
-
|
1,500
|
-
|
1,500
|
Net
cash provided by financing activities
|
565
|
2,602
|
1,080
|
4,854
|
|
|
|
|
|
NET
DECREASE IN CASH AND CASH EQUIVALENTS
|
(312)
|
(171)
|
(1,464)
|
(1,255)
|
|
|
|
|
|
CASH
AND CASH EQUIVALENTS, beginning of period
|
375
|
270
|
1,527
|
1,354
|
|
|
|
|
|
CASH
AND CASH EQUIVALENTS, end of period
|
$63
|
$99
|
$63
|
$99
|
The
accompanying notes are an integral part of these unaudited
condensed consolidated financial statements.
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
a distributed WiFi product line for consumers and small businesses
that is being marketed under the brand name Milo®. We have
also 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 and certain foreign jurisdictions. We believe certain
patents protecting our proprietary technologies have been broadly
infringed by others and therefore our business plan includes
enforcement of our intellectual property rights through patent
infringement litigation and licensing efforts.
We
restructured our operations during the third quarter of 2018 in
order to reduce operating expenses in light of our limited capital
resources. Our primary business is to support and defend the
investments we have made in developing and protecting our
technologies by focusing on our patent enforcement program. We have
made significant investments in developing and protecting our
technologies and products, the returns on which are dependent upon
the generation of future revenues for realization.
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. 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
in every year since inception and have utilized the proceeds from
debt and equity financings to fund our operations, including the
cost of litigation. For the six months ended June 30, 2019, we
incurred a net loss of approximately $3.7 million and negative cash
flows from operations of approximately $2.6 million. At June 30,
2019, we had a working capital deficit of approximately $4.2
million and we had an accumulated deficit of approximately $396.0
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 these condensed consolidated financial
statements.
For the
six months ended June 30, 2019, we received aggregate net proceeds
of approximately $1.64 million from the sale of convertible
promissory notes and $0.23 million for the issuance of short term
notes. At June 30, 2019, we had cash and cash equivalents of
approximately $0.1 million. Our Milo product line has not generated
expected revenues to date and the amount and timing of proceeds
from our patent enforcement actions, if any, is difficult to
predict. Although we have made significant reductions in our
operating costs, we will need additional working capital to fund
our operations.
In July 2019, we sold additional convertible notes for aggregate
proceeds of $0.75 million (see Note 13). 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, additional
litigation financing, 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.
Our
ability to meet our liquidity needs for the next twelve months is
dependent upon one or more of (i) our ability to successfully
negotiate licensing agreements and/or settlements relating to the
use of our technologies by others in excess of our contingent
payment obligations; and/or (ii) our ability to obtain additional
debt or equity financing. We expect that revenue generated from
product sales, 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
sufficient revenues to cover our operational costs and contingent
repayment obligations, we will be required to use available working
capital and/or raise additional working capital through the sale of
equity securities or other financing arrangements.
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 our ability to secure
sufficient financing to support our business and our ability to
generate revenues and/or patent-related proceeds sufficient to
offset expenses and meet our contingent payment obligation and
other debt repayment obligations. 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, 2019 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, 2019 are not necessarily
indicative of the results that may be expected for the year ending
December 31, 2019 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, 2018,
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, 2018 (“2018 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 2018 Annual Report, except as follows:
Adoption of New Accounting Standards
As of
January 1, 2019, we adopted Accounting Standards Codification
(“ASC”) 842, “Leases.” ASC 842 requires
lessees to recognize right-of-use (“ROU”) assets and
lease liabilities on the balance sheet for all finance and
operating leases with lease terms of more than 12 months and
disclose key information about leasing arrangements (see Note 8).
ASC 842 allows for the application of the new standard on the
adoption date without restatement of prior comparative periods or a
modified retrospective transition method which requires application
of the new standard at the beginning of the earliest period
presented. We have elected to use the adoption date as the initial
application date without restatement of prior comparative periods.
We also elected the package of practical expedients permitted under
the transition guidance which, among other things, does not require
us to reassess lease classification. Upon adoption of ASC 842, we
recognized an adjustment to beginning retained earnings of
approximately $0.04 million for the cumulative effect of the change
in accounting principle. We also recorded a ROU asset of
approximately $0.56 million and an increase in our operating lease
liabilities of approximately $0.60 million, primarily related to
operating leases for our office and warehouse facilities. Our
accounting for finance leases remains substantially unchanged.
Adoption of the standard did not materially impact operating
results or cash flows.
As of
January 1, 2019, we adopted Accounting Standards Update
(“ASU”) 2018-02, “Income Statement - Reporting
Comprehensive Income (Topic 220): Reclassification of Certain Tax
Effects from Accumulated Other Comprehensive Income.” The
amendments in this update allow a reclassification from accumulated
other comprehensive income to retained earnings for stranded tax
effects resulting from the Tax Cuts and Jobs Act. We have no
stranded tax effects included in our other comprehensive loss and
therefore the adoption of ASU 2018-02 did not impact our
consolidated financial statements.
As of
January 1, 2019, we adopted ASU 2018-07, "Compensation - Stock
Compensation (Topic 718): Improvements to Nonemployee Share-Based
Payment Accounting." The amendments in this update simplify the
accounting for share-based payments to nonemployees by aligning it
with the accounting for share-based payments to employees, with
certain exceptions. We did not previously have awards to
nonemployees that would require
reassessment and therefore the adoption of ASU 2018-07 did
not impact our condensed consolidated financial
statements.
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, 2019 and
2018 were as follows (in thousands):
|
|
|
|
|
Options
outstanding
|
1,082
|
1,001
|
Warrants
outstanding
|
11,700
|
350
|
Unvested
RSUs
|
-
|
322
|
Shares
underlying convertible notes
|
11,096
|
-
|
|
23,878
|
1,673
|
6. Prepaid Expenses
Prepaid
expenses consist of the following (in thousands):
|
|
|
|
|
|
Prepaid
services
|
$398
|
$252
|
Prepaid
bonds for German statutory costs
|
191
|
199
|
Prepaid
licenses, software tools and support
|
17
|
51
|
Prepaid
insurance
|
14
|
19
|
Other
prepaid expenses
|
17
|
17
|
|
$637
|
$538
|
7. Intangible Assets
Intangible
assets consist of the following (in thousands):
|
|
|
|
|
|
Patents and
copyrights
|
$17,510
|
$18,350
|
Accumulated
amortization
|
(14,169)
|
(14,448)
|
|
$3,341
|
$3,902
|
During
the three and six months ended June 30, 2019, we recorded losses
due to abandonment of patents and patent applications of
approximately $0.2 million.
8. Leases
We
lease our office and other facilities and certain office equipment
under long-term, non-cancelable operating and finance leases. Some
leases include options to purchase, terminate, or extend for one or
more years. These options are included in the lease term when it is
reasonably certain that the option will be exercised. We do not
recognize ROU assets and lease liabilities for leases with terms at
inception of twelve months or less.
At
inception, we determine if an arrangement contains a lease and
whether that lease meets the classification criteria of a finance
or operating lease. Some of our lease arrangements contain lease
components (e.g. minimum rent payments) and non-lease components
(e.g. services). For certain equipment leases, we account for lease
and non-lease components separately based on a relative fair market
value basis. For all other leases, we account for the lease and
non-lease components (e.g. common area maintenance) on a combined
basis.
Following
the adoption of ASC 842 as of January 1, 2019 (see Note 4),
operating leases are included in operating lease right-of-use
assets and operating lease liabilities on the condensed
consolidated balance sheets. Operating lease ROU assets and
liabilities are recognized at commencement date based on the
present value of lease payments over the lease term using the
implicit rate, when readily available, or our incremental borrowing
rate for collateralized debt based on information available at the
lease commencement date. Lease expense for operating leases is
generally recognized on a straight-line basis over the lease term
and is included in operating expenses on the condensed consolidated
statement of comprehensive loss. For the three and six months ended
June 30, 2019, we recognized operating lease costs of approximately
$0.1 million and $0.2 million, respectively.
Finance
leases are included in property, plant, and equipment, other
accrued expenses and other long-term liabilities on the condensed
consolidated balance sheets. Finance leases are recorded as an
asset and an obligation at an amount equal to the present value of
the minimum lease payments during the lease term. Amortization
expense and interest expense associated with finance leases are
included in selling, general, and administrative expense and
interest expense, respectively, on the condensed consolidated
statements of comprehensive loss. Our finance leases are not
material to our condensed consolidated financial statements as of
or for the three and six months ended June 30, 2019.
No new
finance or operating leases commenced during the three or six
months ended June 30, 2019. The following table summarizes the
supplemental cash flow information related to leases, including the
right-of-use assets recognized upon adoption of the new lease
standard (in thousands):
|
|
|
|
|
|
|
|
|
Cash
paid for amounts included in the measurement of lease
liabilities:
|
|
|
Operating
cash flows from operating leases
|
$80
|
$195
|
Right-of-use
assets obtained in exchange for operating lease
liabilities
|
-
|
563
|
The
following table summarizes other supplemental information related
to leases:
|
|
|
|
|
|
Weighted-average
remaining lease term (in years):
|
|
Operating
leases
|
1.3
|
Finance
leases
|
0.7
|
Weighted
average discount rate:
|
|
Operating
leases
|
10.9%
|
Finance
leases
|
8.7%
|
The
future maturities of lease liabilities consist of the following as
of June 30, 2019 (in thousands):
|
|
|
2019
(remaining)
|
$221
|
$1
|
2020
|
185
|
1
|
2021
|
176
|
-
|
2022
|
166
|
-
|
2023
|
4
|
-
|
Thereafter
|
-
|
-
|
Total
undiscounted lease payments
|
$752
|
$2
|
Less:
imputed interest
|
115
|
-
|
Present value of lease liabilities
|
$637
|
$2
|
As of
December 31, 2018, we had a lease liability of approximately $0.1
million which represented the estimated fair value of remaining
lease rental payments for our cease-use facility in Lake Mary,
Florida, less estimated sublease rentals, as accounted for under
ASC 840, “Leases” which was superseded by ASC 842 as of
January 1, 2019.
9. Long-term debt
Notes Payable
Notes
payable at June 30, 2019 and December 31, 2018, consisted of the
following (in thousands):
|
|
|
Description
|
|
|
Note
payable to a related party
|
$862
|
$836
|
Unsecured
short term notes payable
|
225
|
-
|
Secured
note payable
|
1,600
|
2,400
|
Total
notes payable
|
2,687
|
3,236
|
Less
current maturities
|
1,933
|
2,437
|
Long-term
note payable
|
$754
|
$799
|
Note Payable to a Related Party
We have
an unsecured promissory note payable to Sterne, Kessler, Goldstein,
& Fox, PLLC (“SKGF”), a related party, for
outstanding unpaid fees for legal services (the “SGKF
Note”). The SKGF Note, as amended in 2018, accrued interest
at a rate of 8% per annum and provided for payments of principal
and interest of approximately $48,500 per month commencing October
31, 2018 through March 31, 2020. At December 31, 2018, we were in
default on the payment terms of the SKGF Note. In March 2019, we
amended the SKGF Note to provide for a waiver of past payment
defaults, a decrease in the interest rate from 8% per annum to 4%
per annum, an extension of the maturity date from March 2020 to
April 2022, and a modification of payment terms. This amendment
constituted a troubled debt restructuring and has been accounted
for on a prospective basis from the date of the amendment. As of
June 29, 2019, we amended the note to provide for a postponement of
past payment defaults and future payments until October 2019. As of
June 30, 2019, we were in compliance of all terms of the
agreement.
Unsecured Short Term Notes Payable
During
the three months ended June 30, 2019, we entered into short-term
promissory notes with accredited investors for aggregate proceeds
of approximately $0.23 million. The notes are unsecured and bear
interest at a rate of 18% per annum. The notes mature at the
earlier of ninety (90) days following the issuance date or upon our
receipt of additional litigation financing. In the event of
default, the outstanding balance of the notes and any other
obligation from the Company to the lenders shall become due
immediately without demand or notice. If the payment obligations
under the notes are not paid when due, the interest rate increases
to 20% per annum and we are obligated to pay all costs of
collection, including reasonable attorney fees.
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”). 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 Mintz Note accelerates and becomes
immediately due and payable in the case of standard events of
default and/or in the event of a sale or other transfer of
substantially all of our assets or a transfer of more than 50% of
our capital stock in one or a series of transactions or through a
merger or other similar transaction. In an event of default, the
Mintz Note will accrue interest at a rate of 12% per annum on any
outstanding balance until such time that the note is paid in full.
As of December 31, 2018, we were in default on the payment terms of
the Mintz Note. The payment default was cured in January 2019. On
April 1, 2019 and again on June 29, 2019, Mintz waived past and
future payment defaults under the note through at least August
2019, provided that no other event of default occurs. Mintz also
waived acceleration of unpaid principal and interest as well as an
increase in the interest rate to the default rate of 12%. As of
June 30, 2019, we are in compliance with all the terms of the Mintz
Note.
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 convertible notes bear
interest at a stated rate of 8% per annum and interest payments are
made on a quarterly basis. Interest is payable, at our option and
subject to certain equity conditions, in either cash, shares of our
common stock, or a combination thereof. To date, all interest
payments on the convertible notes have been made in shares of our
common stock.
We have
the option to prepay the notes any time following the one-year
anniversary of the issuance of the notes, subject to a premium on
the outstanding principal prepayment amount of 25% prior to the
two-year anniversary of the note issuance date, 20% prior to the
three-year anniversary of the note issuance date, 15% prior to the
four-year anniversary of the note issuance date, or 10% thereafter.
The notes provide for events of default that include failure to pay
principal or interest when due, breach of any of the
representations, warranties, covenants or agreements made by us,
events of liquidation or bankruptcy, and a change in control. In
the event of default, the interest rate increases to 12% per annum
and the outstanding principal balance of the notes plus all accrued
interest due may be declared immediately payable by the holders of
a majority of the then outstanding principal balance of the
convertible notes.
Convertible
notes payable at June 30, 2019 and December 31, 2018 consist of the
following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
Description
|
|
|
|
|
|
Convertible
notes dated September 10, 2018
|
$0.40
|
8.3%
|
September
7, 2023
|
$700
|
$800
|
Convertible
note dated September 19, 2018
|
$0.57
|
8.3%
|
September
19, 2023
|
425
|
425
|
Convertible
notes dated February/March 2019
|
$0.25
|
8.3%
|
February
28, 2024 to March 13, 2024
|
1,300
|
-
|
Convertible
notes dated June 2019
|
$0.10
|
8.3%
|
June
7, 2024 to June 19, 2024
|
340
|
-
|
Total
principal balance
|
|
|
|
2,765
|
1,225
|
Less
Unamortized discount
|
|
|
|
321
|
388
|
|
|
|
|
$2,444
|
$837
|
|
|
|
|
|
|
We have
an obligation to file a registration statement for the shares
underlying the June 2019 notes by the 75th calendar day following
the issuance date of the notes and to cause the registration
statement to become effective by the 150th calendar day following
the issuance dates. 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 amount
paid by holders for the notes upon the occurrence of the event, and
monthly thereafter, up to a maximum of 6%. Registration statements
have previously been filed and declared effective for the September
2018 and February/March 2019 notes.
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, 2019 and the year ended December 31,
2018 (in thousands):
|
Six
Months Ended
June
30, 2019
|
Year
Ended
December
31, 2018
|
Secured contingent
payment obligation, beginning of period
|
$25,557
|
$15,896
|
Proceeds from
contingent payment obligation
|
-
|
4,000
|
Change in fair
value
|
(823)
|
5,661
|
Secured contingent
payment obligation, end of period
|
$24,734
|
$25,557
|
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 in
May 2016, December 2017, April 2018, September 2018 and December
2018. Under the agreement, as of June 30, 2019, we have received
aggregate proceeds of $18.0 million in exchange for
Brickell’s right to reimbursement and compensation from gross
proceeds resulting from patent enforcement and other patent
monetization actions. To date, we have repaid an aggregate of $3.3
million to Brickell from patent enforcement proceeds.
Brickell
is entitled to priority payment of 100% of proceeds received from
patent-related actions until such time that Brickell has been
repaid in full. After repayment of the funded amount, Brickell is
entitled to a portion of remaining proceeds up to a specified
minimum return which is determined as a percentage of the funded
amount and varies based on the timing of repayment. In addition,
Brickell is entitled to a pro rata portion of proceeds from
specified legal actions to the extent aggregate proceeds from those
actions exceed the specified minimum return.
Brickell
holds a senior security interest in the majority of our assets
until such time as the specified minimum return is paid, in which
case, the security interest will be released except with respect to
the patents and proceeds related to specific legal actions. The
security interest is enforceable by Brickell in the event that we
are in default under the agreement which would occur if (i) we
fail, after notice, to pay proceeds to Brickell, (ii) we become
insolvent or insolvency proceedings are commenced (and not
subsequently discharged) with respect to us, (iii) our creditors
commence actions against us (which are not subsequently discharged)
that affect our material assets, (iv) we, without Brickell’s
consent, incur indebtedness other than immaterial ordinary course
indebtedness, or (v) there is an uncured non-compliance of our
obligations or misrepresentations under the agreement. As of June
30, 2019, 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. As of June 30, 2019, the fair value of the obligation
is estimated to be approximately $24.7 million (see Note
10).
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, 2019 and December 31, 2018 (in thousands):
|
|
|
|
|
Quoted
Prices in Active Markets (Level 1)
|
Significant
Other Observable Inputs
(Level
2)
|
Significant
Unobservable Inputs (Level 3)
|
June
30, 2019:
|
|
|
|
|
Liabilities:
|
|
|
|
|
Secured contingent
payment obligation
|
$24,734
|
$-
|
$-
|
$24,734
|
|
|
|
|
|
Quoted
Prices in Active Markets (Level 1)
|
Significant
Other Observable Inputs
(Level
2)
|
Significant
Unobservable Inputs (Level 3)
|
December
31, 2018:
|
|
|
|
|
Liabilities:
|
|
|
|
|
Secured contingent
payment obligation
|
$25,557
|
$-
|
$-
|
$25,557
|
The
fair value of our secured contingent payment obligation was
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 15.75% at June 30, 2019, based on a risk-free rate of 1.75%
as adjusted by 8% for credit risk and 6% for litigation inherent
risk. At December 31, 2018, we
used a risk-adjusted discount rate of approximately 16.5%, based on
a two-year risk-free rate of approximately 2.5% as adjusted by 8%
for credit risk and 6% for litigation inherent risk. The contingent
payment obligation does not have a fixed duration; however, our
cash flow projections assume a remaining duration ranging from
approximately one to three years with an average duration of 2.5
years. The cash outflows could potentially range from $0 to $50.2
million through 2021 with a weighted average outflow of
approximately $36.3 million. We evaluate the estimates and
assumptions used in determining the fair value of our secured
contingent payment obligation each reporting period and make any
adjustments prospectively based on those evaluations. Changes in
any of these Level 3 inputs could result in a 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 have 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 statements of
comprehensive loss and included in current liabilities under the
heading “statutory court costs” in the condensed
consolidated balance sheets. The accompanying condensed statements
of comprehensive loss for the three and six months ended June 30,
2019 exclude any charges related to probable losses that arose
after the date of these financial statements. There is at least a
reasonable possibility of an unfavorable outcome in any one or more
of our legal proceedings that could result in expenses in the
aggregate that could have a material unfavorable impact on our
results of operations as more fully discussed below.
ParkerVision v. Qualcomm and HTC (Middle District of
Florida)
We have
a patent infringement complaint pending in the Middle District of
Florida against Qualcomm and Qualcomm Atheros, Inc. (collectively
“Qualcomm”), and HTC (HTC Corporation and HTC America,
Inc.) (the “Qualcomm Action”) seeking unspecified
damages and injunctive relief for infringement of certain of our
patents. Certain of the defendants have filed counterclaims against
us for non-infringement and invalidity for all patents in the case.
A claim construction hearing was held in August 2015 but no ruling
on claim construction has been issued by the court. In February
2016, the court granted the parties’ joint motion to stay
these proceedings until resolution of proceedings at the
International Trade Commission (“ITC”). In May 2017,
the stay of these proceedings was continued pending an appeal of
certain PTAB decisions with regard to our U.S. Patent 6,091,940
(“the ‘940 Patent”). In September 2018, the
Federal Circuit issued its decision in the appeal of the ‘940
Patent. Accordingly, in January 2019, the court lifted the stay. 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. A case management schedule has
been submitted by the parties with a proposed trial date of
December 2020.
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 the
corresponding case filed at the 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. A case management schedule has been submitted by the
parties with a proposed trial date of August 2020.
ParkerVision v. LG (District of New Jersey)
In July
2017, we filed a patent infringement complaint in the district of
New Jersey against LG for the alleged infringement of the same
patents previously asserted against LG in the middle district of
Florida (see ParkerVision v. Apple
and Qualcomm above). We elected to dismiss the case in the
middle district of Florida and re-file in New Jersey as a result of
a recent Supreme Court ruling regarding proper venue. In March
2018, the court stayed this case pending a final decision in
ParkerVision v. Apple and
Qualcomm 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”). A hearing in this case was held in November 2016 at
which time the court concluded that certain LGE products using
Qualcomm RF circuitry infringe our patent. The final decision in
this case was stayed pending resolution of the corresponding
nullity, or validity, action filed by Qualcomm in the German
Federal Patent Court in Munich (see Qualcomm v. ParkerVision below). In
October 2018, we received an unfavorable decision in the nullity
case for which we filed an appeal. In July 2019, we withdrew our
appeal. As a result, we are subject to a claim for reimbursement of
statutory attorney’s fees and costs in this case. We estimate
a claim of approximately $0.06 million which we have accrued in the
accompanying condensed consolidated financial statements as the
loss is considered probable as of June 30, 2019. We have posted a
bond to cover this cost which is included in “Prepaid
expenses” in the accompanying condensed consolidated balance
sheets.
ParkerVision v. Apple (Munich, Germany) - the Apple I
case
In
October 2016, we filed a complaint in Munich District Court against
Apple, Inc., Apple Distribution International, and Apple Retail
Germany B.V. & Co. KG (collectively “Apple”)
seeking damages and injunctive relief for the alleged infringement
of the ‘831 Patent (the “Apple I Case”). In
February 2017, we amended our complaint adding the infringement of
a second German patent and alleging infringement by Apple devices
that incorporate an Intel transceiver chip. The Munich Regional
Court bifurcated the new claims into a second case (see
ParkerVision v. Apple - the Apple
II case below). A hearing was held in May 2017 in the Apple
I Case. In June 2017, the court deferred its ruling pending the
decision from the German Federal Patent Court in the validity
action filed by Qualcomm (see Qualcomm v. ParkerVision below). In
October 2018, we received an unfavorable decision in the nullity
case for which we filed an appeal which we subsequently withdrew.
We opted not to post a bond to cover the potential statutory costs
in this case. As a result, in March 2019, the district court
declared the complaint withdrawn, a decision we opted not to
appeal. Accordingly, we are subject to a claim for reimbursement of
statutory attorney’s fees and costs of approximately $0.12
million, which is accrued in the accompanying condensed
consolidated financial statements as the loss is considered
probable as of June 30, 2019.
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. Based on the October 2018 decision from the
federal court, we recorded a contingent loss of $0.11 million for
the estimated statutory fees and costs in this case as of December
31, 2018. In January 2019, we appealed this decision to the German
Supreme Court, but withdrew our appeal in July 2019.
ParkerVision v. Apple (Munich, Germany) - the Apple II
case
The
Apple II case seeks damages and injunctive relief for the alleged
infringement of the German part of our European patent 1 135 853
(“the ‘853 Patent”). A preliminary hearing was
held in November 2017. Subsequent to the hearing, the court
requested that we supplement certain elements of the infringement
claims against Apple devices. In May 2018, we filed our
supplemental briefs as requested by the court. In October 2018, we
also filed a supplemental expert report. The court appointed an
expert in this case and a hearing was held in March 2019 for
purposes of providing expert testimony. The court ruled in April
2019 that Apple does not infringe our ‘853 Patent. We did not
appeal this decision. As a result, we are subject to a claim for
reimbursement of statutory attorney’s fees and costs in this
case. We estimate a claim of approximately $0.13 million which we
have accrued in the accompanying condensed consolidated financial
statements as the loss is considered probable as of June 30, 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. If the ‘853 Patent is declared
invalid, we may be subject to a claim for reimbursement of
statutory attorney fees and costs in this case which we currently
estimate will not exceed $0.1 million. No dates have yet been set
in this nullity action, and the accompanying condensed consolidated
financial statements do not include any accrual for a loss
contingency in this case as a loss is not considered
probable.
12. 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 2018 Annual
Report.
The
following table presents share-based compensation expense included
in our condensed consolidated statements of comprehensive loss for
the three and six months ended June 30, 2019 and 2018, respectively
(in thousands):
|
|
|
|
|
|
|
|
|
|
|
Research
and development expenses
|
$-
|
$50
|
$5
|
$115
|
Selling,
general and administrative expenses
|
48
|
298
|
110
|
596
|
Total
share-based compensation expense
|
$48
|
$348
|
$115
|
$711
|
13. Subsequent Events
In July 2019, we sold convertible notes for aggregate proceeds of
$0.75 million to accredited investors. The notes mature five years
from the date of issuance. The first tranche of notes with a face
value of $0.05 million are convertible, at the holders’
option, into shares of our common stock at a fixed conversion price
of $0.10 per share and bear interest at a stated rate of 8% per
annum. The second tranche of notes with an aggregate face value of
$0.7 million are convertible, at the holders’ option, into
shares of our common stock at $0.08 per share and bear interest at
a stated rate of 7.5% per annum. Interest is payable quarterly, and
we may elect, subject to certain equity conditions, to pay interest
in cash, shares of our common stock, or a combination thereof. In
addition, we issued a warrant for the purchase of 1.8 million
shares of our common stock at an exercise price of $0.10 per share
to Park Consultants LLC ("Park") as a nonrefundable retainer for
services for a period of 18 months valued at approximately $0.2
million. The warrant is immediately exercisable and expires in July
2024. Park is providing advisory services with regard to our future
business strategies.
In
August 2019, our board of directors ("Board") adopted the 2019
Long-Term Incentive Plan (the "2019 Plan") to enable us to offer
equity-based compensation to our employees, officers, directors and
consultants who have been, are, or will be important to our
success. Subject to authorization of sufficient shares for issuance
by our stockholders, 12 million shares will be reserved for
issuance under the 2019 Plan. In addition, the Board approved the
grant of two-year nonqualified stock options, with an exercise
price of $0.17 per share, vesting in 8 equal quarterly installments
commencing September 1, 2019, provided that such options will not
be exercisable unless and until we have sufficient authorized
unissued shares or treasury shares available for such exercise.
Each of our three non-employee directors were granted an option to
purchase 800,000 shares, Jeffrey Parker, our Chief Executive
Officer, was granted an option to purchase 6,000,000 shares,
Cynthia Poehlman, our Chief Financial Officer, was granted an
option to purchase 1,000,000 shares, Gregory Rawlins, our Chief
Technical Officer, was granted an option to purchase 750,000 shares
and one additional key employee was granted an option to purchase
400,000 shares. The aggregate grant-date fair value of the awards,
totaling approximately $1.5 million, will be recognized as
share-based compensation expense over the two-year life of the
awards.
Report of Independent Registered Public Accounting
Firm
Shareholders and Board of Directors
ParkerVision, Inc.
Jacksonville, Florida
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheet of ParkerVision, Inc. (the “Company”)
and its subsidiary as of December 31, 2018, and the related consolidated statement of
comprehensive loss, shareholders’ deficit and cash flows for
the year then ended, and the related notes (collectively
referred to as the “consolidated financial
statements”). In our opinion, the consolidated financial
statements present fairly, in all material respects, the financial
position of the Company and its
subsidiary at December 31, 2018, and the results of
their operations and their cash flows for the year then ended in conformity
with accounting principles generally accepted in the United States
of America.
Basis for Opinion
These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion
on the Company’s consolidated financial statements based on our audit. We are a
public accounting firm registered with the Public Company
Accounting Oversight Board (United States) (“PCAOB”)
and are required to be independent with respect to the Company in
accordance with the U.S. federal securities laws and the applicable
rules and regulations of the Securities and Exchange Commission and
the PCAOB.
We conducted our audit in accordance with the standards of the
PCAOB and in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we
plan and perform the audit to obtain reasonable assurance about
whether the consolidated financial statements are free of material
misstatement, whether due to error or fraud. Our audit included
performing procedures to assess the risks of material misstatement
of the consolidated financial statements, whether due to error or
fraud, and performing procedures that respond to those risks. Such
procedures included examining, on a test basis, evidence regarding
the amounts and disclosures in the consolidated financial statements. Our audit also included
evaluating the accounting principles used and significant estimates
made by management, as well as evaluating the overall presentation
of the consolidated financial statements. We believe that our audit
provides a reasonable basis for our opinion.
Emphasis of Matter Regarding Going Concern
The accompanying consolidated financial statements have been
prepared assuming that the Company will continue as a going
concern. As discussed in Note 2 to the consolidated financial
statements, the Company has suffered recurring losses
from operations and has a net capital deficiency that raise substantial doubt about its
ability to continue as a going concern. Management's plans in
regard to these matters are also described in Note 2. The
consolidated financial statements do not include any adjustments
that might result from the outcome of this uncertainty. Our opinion
is not modified with respect to this matter
/s/ BDO
USA, LLP
Certified Public Accountants
We have
served as the Company's auditor since 2018.
Jacksonville, Florida
April 1, 2019
Report of Independent Registered Public Accounting
Firm
To the Board of Directors and
Shareholders
of ParkerVision, Inc.
Opinion on the Financial Statements
We have
audited the consolidated balance sheet of ParkerVision, Inc. and
its subsidiary (the “Company”) as of December 31, 2017,
and the related consolidated statements of comprehensive loss,
shareholders’ deficit and cash flows for the year ended
December 31, 2017, including the related notes (collectively
referred to as the “consolidated financial
statements”). In our opinion, the consolidated financial
statements present fairly, in all material respects, the financial
position of the Company as of December 31, 2017, and the results of
its operations and its cash flows for the year ended December 31,
2017 in conformity with accounting principles generally accepted in
the United States of America.
Substantial Doubt About the Company’s Ability to Continue as
a Going Concern
The
consolidated financial statements have been prepared assuming that
the Company will continue as a going concern. As discussed in Note
2 to the consolidated financial statements, the Company has
suffered recurring losses from operations and negative cash flows
that raise substantial doubt about its ability to continue as a
going concern. Management's plans in regard to these matters are
also described in Note 2. The consolidated financial statements do
not include any adjustments that might result from the outcome of
this uncertainty.
Basis for Opinion
These
consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion
on the Company’s consolidated financial statements based on
our audit. We are a public accounting firm registered with the
Public Company Accounting Oversight Board (United States)
(“PCAOB”) and are required to be independent with
respect to the Company in accordance with the U.S. federal
securities laws and the applicable rules and regulations of the
Securities and Exchange Commission and the PCAOB.
We
conducted our audit of these consolidated financial statements in
accordance with the standards of the PCAOB. Those standards require
that we plan and perform the audit to obtain reasonable assurance
about whether the consolidated financial statements are free of
material misstatement, whether due to error or fraud.
Our
audit included performing procedures to assess the risks of
material misstatement of the consolidated financial statements,
whether due to error or fraud, and performing procedures that
respond to those risks. Such procedures included examining, on a
test basis, evidence regarding the amounts and disclosures in the
consolidated financial statements. Our audit also included
evaluating the accounting principles used and significant estimates
made by management, as well as evaluating the overall presentation
of the consolidated financial statements. We believe that our audit
provides a reasonable basis for our opinion.
/s/PricewaterhouseCoopers
LLP
Jacksonville,
Florida
March
29, 2018
We
served as the Company's auditor from 1999 to 2017.
PARKERVISION,
INC.
CONSOLIDATED
BALANCE SHEETS
FOR THE
YEARS ENDED DECEMBER 31, 2018 AND 2017
|
|
|
|
|
|
CURRENT
ASSETS:
|
|
|
Cash and cash
equivalents
|
$1,527
|
$354
|
Restricted cash
equivalents
|
-
|
1,000
|
Available-for-sale
securities
|
-
|
26
|
Accounts
receivable, net of allowance for doubtful accounts of $0 and $3 at
December 31, 2018 and 2017, respectively
|
2
|
27
|
Inventories,
net
|
98
|
1,025
|
Prepaid
expenses
|
538
|
1,002
|
Other current
assets
|
55
|
9
|
Held for sale
assets
|
65
|
-
|
Total current
assets
|
2,285
|
3,443
|
|
|
|
Property and
equipment, net
|
129
|
376
|
Intangible
assets, net
|
3,902
|
5,076
|
Other assets,
net
|
15
|
15
|
Total
assets
|
$6,331
|
$8,910
|
|
|
|
CURRENT
LIABILITIES:
|
|
|
Accounts
payable
|
$655
|
$678
|
Accrued
expenses:
|
|
|
Salaries and
wages
|
122
|
376
|
Professional
fees
|
493
|
2,054
|
Other accrued
expenses
|
563
|
238
|
Related
party note payable, current portion
|
37
|
294
|
Secured note
payable
|
2,400
|
-
|
Lease payable,
current portion
|
86
|
-
|
Deferred
revenue
|
-
|
19
|
Total current
liabilities
|
4,356
|
3,659
|
|
|
|
LONG-TERM
LIABILITIES:
|
|
|
Secured
contingent payment obligation
|
25,557
|
15,896
|
Convertible
notes, net
|
837
|
-
|
Related party
note payable, net of current portion
|
799
|
531
|
Lease payable, net
of current portion
|
91
|
-
|
Other long-term
liabilities
|
1
|
68
|
Total long-term
liabilities
|
27,285
|
16,495
|
Total
liabilities
|
31,641
|
20,154
|
|
|
|
COMMITMENTS AND
CONTINGENCIES
|
|
|
|
|
|
SHAREHOLDERS' DEFICIT:
|
|
|
Common stock, $.01 par value, 75,000 and 30,000 shares
authorized,
28,677 and 21,222 issued and outstanding at December 31,
2018
and 2017,
respectively
|
287
|
212
|
Warrants
outstanding
|
1,810
|
826
|
Additional paid-in
capital
|
364,885
|
359,141
|
Accumulated
deficit
|
(392,292)
|
(371,423)
|
Total shareholders'
deficit
|
(25,310)
|
(11,244)
|
Total liabilities
and shareholders' deficit
|
$6,331
|
$8,910
|
The
accompanying notes are an integral part of these consolidated
financial statements.
F-18
PARKERVISION,
INC.
CONSOLIDATED
STATEMENTS OF COMPREHENSIVE LOSS
FOR THE
YEARS ENDED DECEMBER 31, 2018 AND 2017
|
|
|
Licensing
revenue
|
$-
|
$-
|
Product
revenue
|
135
|
100
|
Total revenue
|
135
|
100
|
|
|
|
Cost of sales -
licensing
|
-
|
-
|
Cost of sales -
product
|
103
|
75
|
Loss on impairment of
inventory
|
1,134
|
125
|
Gross margin
|
(1,102)
|
(100)
|
|
|
|
Research and development
expenses
|
2,875
|
4,344
|
Selling, general, and
administrative expenses
|
10,427
|
14,061
|
Restructuring
expenses
|
690
|
-
|
Total operating
expenses
|
13,992
|
18,405
|
|
|
|
Interest and other
income
|
2
|
26
|
Interest and other
expense
|
(116)
|
(69)
|
Change in fair value of
contingent payment obligation
|
(5,661)
|
(711)
|
Total interest and
other
|
(5,775)
|
(754)
|
|
|
|
Net loss before income
tax
|
(20,869)
|
(19,259)
|
|
|
|
Income tax
expense
|
-
|
-
|
|
|
|
Net loss
|
(20,869)
|
(19,259)
|
|
|
|
Other comprehensive income, net
of tax
|
-
|
-
|
|
|
|
Comprehensive
loss
|
$(20,869)
|
$(19,259)
|
|
|
|
Basic and diluted net loss per
common share
|
$(0.85)
|
$(1.09)
|
|
|
|
Weighted average common shares
outstanding
|
24,429
|
17,688
|
|
|
|
The
accompanying notes are an integral part of these consolidated
financial statements.
F-19
PARKERVISION,
INC.
CONSOLIDATED
STATEMENTS OF SHAREHOLDERS’ DEFICIT
FOR THE
YEARS ENDED DECEMBER 31, 2018 AND 2017
|
|
|
Additional
Paid-in
Capital
|
|
Total
Shareholders'
Deficit
|
Balance as of December 31,
2016
|
$132
|
$826
|
$343,087
|
$(352,164)
|
$(8,119)
|
Issuance of common
stock and warrants in public and private offerings, net of issuance
costs
|
73
|
-
|
13,606
|
-
|
13,679
|
Issuance of common
stock for services
|
3
|
-
|
422
|
-
|
425
|
Share-based
compensation, net of shares withheld for taxes
|
4
|
-
|
2,026
|
-
|
2,030
|
Comprehensive loss
for the year
|
-
|
-
|
-
|
(19,259)
|
(19,259)
|
Balance as of December 31,
2017
|
212
|
826
|
359,141
|
(371,423)
|
(11,244)
|
Issuance of common
stock and warrants in public and private offerings, net of issuance
costs
|
45
|
1,950
|
3,281
|
-
|
5,276
|
Exercise of
warrants
|
20
|
(475)
|
455
|
-
|
-
|
Expiration of
warrants
|
-
|
(491)
|
491
|
-
|
-
|
Issuance of
convertible debt with beneficial conversion feature
|
-
|
-
|
442
|
-
|
442
|
Issuance of common
stock upon conversion and payment of interest in kind on
convertible debt
|
4
|
-
|
52
|
-
|
56
|
Share-based
compensation, net of shares withheld for taxes
|
6
|
-
|
1,023
|
-
|
1,029
|
Comprehensive loss
for the year
|
-
|
-
|
-
|
(20,869)
|
(20,869)
|
Balance as of December 31,
2018
|
$287
|
$1,810
|
$364,885
|
$(392,292)
|
$(25,310)
|
The
accompanying notes are an integral part of these consolidated
financial statements.
F-20
PARKERVISION,
INC.
CONSOLIDATED
STATEMENTS OF CASH FLOWS
FOR THE
YEARS ENDED DECEMBER 31, 2018 AND 2017
|
|
|
CASH FLOWS FROM
OPERATING ACTIVITIES:
|
|
|
Net
loss
|
$(20,869)
|
$(19,259)
|
Adjustments to
reconcile net loss to net cash used in
operating activities:
|
|
|
Depreciation and
amortization
|
1,209
|
1,301
|
Share-based
compensation
|
1,050
|
2,164
|
Loss on disposal of
equipment and other assets
|
489
|
85
|
Write down of
obsolete inventory
|
1,134
|
125
|
Realized gain on
available-for-sale securities
|
-
|
(9)
|
Changes in fair
value of contingent payment obligation
|
5,661
|
711
|
Changes in
operating assets and liabilities:
|
|
|
Accounts
receivable
|
25
|
(26)
|
Inventories
|
(207)
|
(980)
|
Prepaid expenses
and other
|
62
|
84
|
Accounts payable
and accrued expenses
|
1,034
|
1,744
|
Lease
payable
|
115
|
-
|
Total
adjustments
|
10,572
|
5,199
|
Net cash used in
operating activities
|
(10,297)
|
(14,060)
|
|
|
|
CASH FLOWS FROM
INVESTING ACTIVITIES:
|
|
|
Purchase of
available-for-sale securities
|
-
|
(4,813)
|
Proceeds from
redemption of available-for-sale securities
|
26
|
4,810
|
Proceeds from sale
of assets
|
50
|
18
|
Purchases of
property and equipment
|
(5)
|
(252)
|
Payments for patent
costs and other intangible assets
|
(16)
|
(61)
|
Net cash provided
by (used in) investing activities
|
55
|
(298)
|
|
|
|
CASH FLOWS FROM
FINANCING ACTIVITIES:
|
|
|
Net proceeds from
issuance of common stock and warrants
|
|
|
in public and
private offerings
|
5,276
|
13,679
|
Net
proceeds from debt financings
|
5,294
|
1,000
|
Shares withheld for
payment of taxes
|
(21)
|
(134)
|
Debt
repayments
|
(132)
|
-
|
Principal payments
on capital lease obligation
|
(2)
|
(2)
|
Net cash provided
by financing activities
|
10,415
|
14,543
|
|
|
|
NET CHANGE IN CASH,
CASH EQUIVALENTS, AND RESTRICTED CASH EQUIVALENTS
|
173
|
185
|
CASH, CASH
EQUIVALENTS, AND RESTRICTED CASH EQUIVALENTS, beginning of
year
|
1,354
|
1,169
|
CASH, CASH
EQUIVALENTS, AND RESTRICTED CASH EQUIVALENTS, end of
year
|
$1,527
|
$1,354
|
|
|
|
SUPPLEMENTAL CASH
FLOW INFORMATION:
|
|
|
Cash paid for
interest
|
$39
|
$69
|
Cash paid for
income taxes
|
$-
|
$-
|
SUPPLEMENTAL
SCHEDULE OF NON-CASH ACTIVITIES:
|
|
|
Payment of interest
in kind on convertible notes
|
$26
|
$-
|
Purchase of
equipment under capital lease
|
$-
|
$6
|
|
|
|
The
accompanying notes are an integral part of these consolidated
financial statements.
F-21
PARKERVISION,
INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31,
2018 and 2017
1.
SIGNIFICANT ACCOUNTING
POLICIES
ParkerVision,
Inc. and its wholly-owned German subsidiary, ParkerVision GmbH
(collectively “ParkerVision”, “we” or the
“Company”) is in the business of innovating fundamental
wireless hardware and software technologies and products. We have
designed and developed proprietary radio frequency
(“RF”)
technologies for use in semiconductor circuits for wireless
communication products. We believe certain patents protecting our
proprietary technologies have been broadly infringed by others and
therefore our business plan includes enforcement of our
intellectual property rights through patent infringement litigation
and licensing efforts. We have also designed and developed a
consumer distributed WiFi product line that is being marketed under
the brand name Milo®.
We
restructured our operations during the third quarter of 2018 in
order to reduce operating expenses in light of our limited capital
resources. As a result, our primary business is to support and
defend the investments we have made in developing and protecting
our technologies by focusing on our patent enforcement program. We
have determined that our business currently operates under a single
operating and reportable segment.
Basis of Presentation
Our
consolidated financial statements are prepared in accordance with
generally accepted accounting principles in the United States of
America (“GAAP”). Certain reclassifications have been
made to prior period amounts to conform to the current period
presentation. The consolidated financial statements include the
accounts of ParkerVision, Inc. and our wholly-owned German
subsidiary, ParkerVision GmbH, after elimination of all
intercompany transactions and accounts.
Use of Estimates in the Preparation of Financial
Statements
The
preparation of financial statements in conformity with GAAP
requires us to make estimates and assumptions that affect the
reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of revenues and
expenses during the reporting periods. The more significant
estimates made by us include projected future cash flows and
risk-adjusted discount rates for estimating the fair value of our
secured contingent payment obligation, the volatility and estimated
lives of share-based awards used in the estimate of the fair market
value of share-based compensation, the assessment of recoverability
of long-lived assets, the amortization periods for intangible and
long-lived assets, and the valuation allowance for deferred taxes.
Actual results could differ from the estimates made. We
periodically evaluate estimates used in the preparation of the
financial statements for continued reasonableness. Appropriate
adjustments, if any, to the estimates used are made prospectively
based upon such periodic evaluation.
Cash, Cash Equivalents, and Restricted Cash
Equivalents
We
consider cash and cash equivalents to include cash on hand,
interest-bearing deposits, overnight repurchase agreements and
investments with original maturities of three months or less when
purchased. Restricted cash equivalents represent money market
investments that are restricted for specific use in payment of
legal fees and expenses related to certain of our patent
infringement actions. The restricted money market investments have
weighted average maturities of three months or less when purchased
and are recorded at fair value. We have determined that the fair
value of our restricted money market investments fall within Level
1 in the fair value hierarchy (see Note 8).
Inventory
Inventory
is stated at the lower of actual cost, as determined under the
first-in, first-out method, or estimated net realizable value. We
review our inventory for estimated obsolescence or unmarketable
inventory and write down inventory for the difference between cost
and estimated market value based upon assumptions about future
demand. Future demand is affected by market conditions,
technological obsolescence, new products and strategic plans, each
of which is subject to change.
Property and Equipment
Property
and equipment are stated at cost, less accumulated depreciation.
Depreciation is determined using the straight-line method over the
following estimated useful lives:
Manufacturing
and office equipment
|
5-7
years
|
Leasehold
improvements
|
Shorter
of useful life or remaining life of lease
|
Furniture
and fixtures
|
7
years
|
Computer
equipment and software
|
3-5
years
|
The
cost and accumulated depreciation of assets sold or retired are
removed from their respective accounts, and any resulting net gain
or loss is recognized in the accompanying consolidated statements
of comprehensive loss. The carrying value of long-lived assets is
reviewed on a regular basis for the existence of facts, both
internally and externally, that may suggest impairment.
Recoverability of assets to be held and used is measured by
comparing the carrying amount of an asset to the estimated
undiscounted future cash flows expected to be generated by the
asset. If the carrying amount of the assets exceeds its estimated
undiscounted future net cash flows, an impairment charge is
recognized in the amount by which the carrying amount of the asset
exceeds the fair value of the assets.
Intangible Assets
Patents,
copyrights and other intangible assets are amortized using the
straight-line method over their estimated period of benefit. We
estimate the economic lives of our patents and copyrights to be
fifteen to twenty years. We estimate the economic lives of other
intangible assets, including licenses, based on estimated
technological obsolescence, to be two to five years, which is
generally shorter than the contractual lives. Management evaluates
the recoverability of intangible assets periodically and takes into
account events or circumstances that may warrant revised estimates
of useful lives or that may indicate impairment
exists.
Secured Contingent Payment Obligation
We have
accounted for our secured contingent repayment obligation as
long-term debt in accordance with Accounting Standards Codification
(“ASC”)
470-10-25, “Sales of Future Revenues or Various other
Measures of Income.” Our repayment obligations are contingent
upon the receipt of proceeds from patent enforcement and/or patent
monetization actions. We have elected to measure our secured
contingent payment obligation at its fair value in accordance with
ASC 825, “Financial Instruments” based on the variable
and contingent nature of the repayment provisions. We have
determined that the fair value of our secured contingent payment
obligation falls within Level 3 in the fair value hierarchy which
involves significant estimates and assumptions including projected
future patent-related proceeds and the risk-adjusted rate for
discounting future cash flows (see Note 8). Actual results could
differ from the estimates made. Changes in fair value, including
the component related to imputed interest, are included in the
accompanying consolidated statements of comprehensive loss under
the heading “Change in fair value of contingent payment
obligation”.
Leases
Our
facilities are leased under operating leases. For those leases that
contain rent escalations or rent concessions, we record the total
rent payable during the lease term on a straight-line basis over
the term of the lease with the difference between the rents paid
and the straight-line rent recorded as a deferred rent liability in
the accompanying consolidated balance sheets.
In
February 2016, the FASB established ASC 842, “Leases”
by issuing ASU 2016-02 to increase transparency and comparability
among organizations by recognizing lease assets and lease
liabilities on the balance sheet and disclosing key information
about leasing arrangements. ASC 842 was subsequently amended by ASU
2018-01, ASU 2018-10 and ASU 2018-11 which provided practical
expedients for adoption of ASC 842. Under the new guidance, a
lessee will be required to recognize assets and liabilities for
capital and operating leases with lease terms of more than 12
months. ASC 842 is effective for interim and annual periods
beginning after December 15, 2018. A modified retrospective
transition approach is required for adoption, applying the new
standard to all leases existing at the date of initial application.
An entity may choose to use either the effective date or the
beginning of the earliest comparative period presented in the
financial statements as its date of initial
application.
ASC 842
will be effective for us as of January 1, 2019, and we have elected
to use the effective date as the initial application date.
Consequently, financial information will not be updated and the
disclosures required under the new standard will not be provided
for dates and period prior to January 1, 2019. The new standard
provides a number of practical expedients in transition and we
expect to elect the package of practical expedients which permits
us not to reassess under the new standard our prior conclusions
about lease identification, lease classification and treatment of
initial direct costs. We expect the adoption of this new standard
to result in the recognition of operating lease right-to-use assets
and operating lease liabilities of approximately $0.56 million and
$0.61 million, respectively, primarily related to our facilities
leases. In addition, adoption of the new standard will result in
significant new disclosures about our leasing
activities.
Revenue Recognition
As of
January 1, 2018, we adopted ASC 606, “Revenue from Contracts
with Customers” which implements a common revenue standard
that clarifies the principles for recognizing revenue. This new
revenue recognition model provides a five-step analysis in
determining when and how revenue is recognized. The adoption of ASC
606 had no material effect on our consolidated financial
statements.
We
derive revenue from licensing of our intellectual property,
settlements from patent infringement disputes and sales of
products. The timing of revenue recognition and the amount of
revenue recognized depends upon a variety of factors, including the
specific terms of each arrangement and the nature of our
deliverables and obligations. In general, we recognize revenue when
the performance obligations to our customers have been met. For the
sale of products, the performance obligation is generally met at
the time product is delivered to the customer. Estimated product
returns are deducted from revenue and recorded as a liability.
Revenue from the sale of our products includes shipping and
handling charged to the customer. Product revenue is recorded net
of sales tax collected from customers, discounts, and actual and
estimated future returns.
The
consideration received from patent license and settlement
agreements is allocated to the various elements of the arrangement
to the extent the revenue recognition differs between the elements
of the arrangement. Elements related to past and future royalties
as well as elements related to settlement will be recorded as
revenue in our consolidated statements of comprehensive loss when
our performance obligations related to each element have been
met.
Shipping and Handling Costs
Shipping
and handling costs related to product sales for the years ended
December 31, 2018 and 2017 were approximately $12,000 and $5,000,
respectively. These costs are included in selling, general and
administrative expenses in the accompanying consolidated statements
of comprehensive loss.
Advertising Expense
Advertising
costs are expensed as incurred. Advertising expenses of
approximately $0.7 million and $0.4 million for the years
ended December 31, 2018 and 2017, respectively, are included
in selling, general, and administrative expenses in the
accompanying consolidated statements of comprehensive
loss.
Research and Development Expenses
Research
and development costs are expensed as incurred and include salaries
and benefits, costs paid to third party contractors, prototype
expenses, an allocated portion of facilities costs, maintenance
costs for software development tools, and
depreciation.
Accounting for Share-Based Compensation
We have
various share-based compensation programs which provide for equity
awards including stock options, restricted stock units
(“RSUs”) and restricted
stock awards (“RSAs”). We calculate the
fair value of employee share-based equity awards on the date of
grant and recognize the calculated fair value as compensation
expense over the requisite service periods of the related awards.
We estimate the fair value of stock option awards using the
Black-Scholes option valuation model. This valuation model requires
the use of highly subjective assumptions and estimates including
how long employees will retain their stock options before
exercising them and the volatility of our common stock price over
the expected life of the equity award. Such estimates, and the
basis for our conclusions regarding such estimates, are outlined in
detail in Note 12. Estimates of fair value are not intended to
predict actual future events or the value ultimately realized by
persons who receive equity awards. We account for forfeitures of
share-based awards as they occur.
As of
January 1, 2018, we adopted ASU No. 2017-09, “Compensation -
Stock Compensation (Topic 718): Scope of Modification
Accounting.” This update provides guidance on the types of
changes to the terms or conditions of share-based payment awards to
which an entity would be required to apply modification accounting
under ASC 718. The adoption of this guidance did not have a
material effect on our consolidated financial
statements.
Income Taxes
The
provision for income taxes is based on loss before taxes as
reported in the accompanying consolidated statements of
comprehensive loss. Deferred tax assets and liabilities are
recognized for the expected future tax consequences of events that
have been included in the financial statements or tax returns.
Deferred tax assets and liabilities are determined based on
differences between the financial statement carrying amounts and
the tax basis of assets and liabilities using enacted tax rates in
effect for the year in which the differences are expected to
reverse. Valuation allowances are established to reduce deferred
tax assets when, based on available objective evidence, it is more
likely than not that the benefit of such assets will not be
realized. Our deferred tax assets exclude unrecognized tax benefits
which do not meet a more-likely-than-not threshold for financial
statement recognition for tax positions taken or expected to be
taken in a tax return.
On December 22, 2017, the Tax Cuts and Jobs Act of 2017 (the
“Tax
Act”) was signed into law
making significant changes to the Internal Revenue Code. Changes
include, but are not limited to, a corporate tax rate decrease to
21% effective for tax years beginning after December 31,
2017.
Loss per Common Share
Basic
loss per common share is determined based on the weighted-average
number of common shares outstanding during each year. Diluted loss
per common share is the same as basic loss per common share as all
potential common shares are excluded from the calculation, as their
effect is anti-dilutive.
The
number of shares underlying outstanding options, warrants, unvested
RSUS and convertible notes at December 31, 2018 and 2017 were as
follows (in thousands):
|
|
|
Options
outstanding
|
1,228
|
1,007
|
Warrants
outstanding
|
13,279
|
420
|
Unvested
RSUs
|
14
|
521
|
Shares underlying
convertible notes
|
2,746
|
-
|
|
17,267
|
1,948
|
These
potential shares were excluded from the computation of diluted loss
per share as their effect would have been
anti-dilutive.
2.
LIQUIDITY AND GOING
CONCERN
The
accompanying consolidated financial statements as of and for the
year ended December 31, 2018 were prepared assuming we will
continue as a going concern, which contemplates that we will
continue in operation and will be able to realize our assets and
settle our liabilities and commitments in the normal course of
business for a period of at least one year from the issuance date
of these financial statements. These consolidated financial
statements do not include any adjustments to reflect the possible
future effects on the recoverability and classification of assets
or the amounts and classification of liabilities that could result
should we be unable to continue as a going concern.
We have
incurred significant losses from operations and negative cash flows
in every year since inception and have utilized the proceeds from
the sales of our equity and equity-linked securities and our
contingent funding arrangements with third-parties to fund our
operations, including our litigation costs. For the year ended
December 31, 2018, we incurred a net loss of approximately
$20.9 million and negative cash flows from operations of
approximately $10.3 million. At December 31, 2018, we had
a working capital deficit of approximately $2.1 million and an
accumulated deficit of approximately $392.3 million. These
circumstances raise substantial doubt about our ability to continue
to operate as a going concern for a period of one year after the
issuance date of these consolidated financial
statements.
At
December 31, 2018, we had cash and cash equivalents of
approximately $1.5 million. In addition, during the first quarter
of 2019, we received net proceeds of approximately $1.3 million
from the issuance of additional convertible debt securities. In
August 2018, we implemented cost reduction measures and ceased
ongoing chip development activities and significantly curtailed our
spending for sales and marketing of our WiFi product line in order
to focus our limited resources on our patent enforcement program.
We expect to sell or otherwise exit the Milo product operations the
second quarter of 2019 and intend to focus our resources solely on
licensing and enforcement of our wireless technologies. However,
although we may receive proceeds from our patent enforcement
actions in 2019, the timing and amount of such proceeds, if any,
are difficult to predict and there can be no assurance we will
receive any proceeds from these enforcement actions. In addition,
we have approximately $2.4 million in debt obligations due to be
repaid in 2019.
Our
ability to meet our liquidity needs for the twelve months after the
issuance date of these financial statements is dependent upon one
or more of (i) our ability to successfully negotiate licensing
agreements and/or settlements relating to the use of our
technologies by others in excess of our contingent payment
obligations to legal counsel; and/or (ii) our ability to raise
additional capital from the sale of equity securities or other
financing arrangements. We anticipate that we will continue to
invest in patent protection and licensing and enforcement of our
wireless technologies. We expect that revenue generated from patent
enforcement actions, and technology licenses over the twelve months
after the issuance date of these financial statements, if any,
after deduction of payment obligations to Brickell and legal
counsel, may not be sufficient to cover our operating expenses. In
the event we do not generate revenues, or other patent-asset
proceeds, sufficient to cover our operational costs and contingent
repayment obligation, we will be required to raise additional
working capital through the sale of equity securities or other
financing arrangements.
The
long-term continuation of our business plan is dependent upon our
ability to secure sufficient financing to support our business, and
our ability to generate revenues and/or patent-related proceeds
sufficient to offset expenses and meet our contingent payment
obligation and other long-term debt repayment obligations. Failure
to generate sufficient revenues, raise additional capital through
debt or equity financings, and/or reduce operating costs could have
a material adverse effect on our ability to meet our short and
long-term liquidity needs and achieve our intended long-term
business objectives.
3.
INVENTORIES
Inventories
consisted of the following at December 31, 2018 and 2017 (in
thousands):
|
|
|
Raw
materials$
|
139
|
$573
|
Work-in-process
|
-
|
-
|
Finished
goods
|
941
|
452
|
|
1,080
|
1,025
|
Inventory
reserves
|
(982)
|
-
|
|
98
|
1,025
|
During
the years ended December 31, 2018 and 2017, we recognized
impairment charges to reduce our excess and obsolete inventories to
their net realizable values. The following table provides a
reconciliation of our inventory reserves for the years ended
December 31, 2018 and 2017, respectively (in
thousands):
|
|
|
Inventory reserves
at beginning of year
|
$-
|
$-
|
Impairment
charges
|
1,134
|
125
|
Write down of
impaired inventories
|
(152)
|
(125)
|
Inventory reserves
at end of year
|
$982
|
$-
|
4.
PREPAID
EXPENSES
Prepaid
expenses consisted of the following at December 31, 2018 and
2017 (in thousands):
|
|
|
Prepaid
services
|
$252
|
$253
|
Prepaid bonds for
German statutory costs
|
199
|
62
|
Prepaid licenses,
software tools and support
|
51
|
404
|
Prepaid inventory
and production tooling
|
-
|
121
|
Prepaid
advertising
|
-
|
75
|
Prepaid
insurance
|
19
|
54
|
Other prepaid
expenses
|
17
|
33
|
|
$538
|
$1,002
|
In
2018, we recorded impairment charges of approximately $0.4 million
related to prepaid licenses and production tooling as a result of
the restructuring of our operations. These charges are included in
“Restructuring expenses” in the accompanying statements
of comprehensive loss (see Note 13).
5.
PROPERTY AND EQUIPMENT,
NET
Property
and equipment, at cost, consisted of the following at
December 31, 2018 and 2017 (in thousands):
|
|
|
Equipment and
software, including equipment purchased under capital leases of $17
and $297 at December 31, 2018 and 2017, respectively
|
$1,555
|
$6,556
|
Leasehold
improvements
|
786
|
786
|
Furniture and
fixtures
|
182
|
185
|
|
2,523
|
7,527
|
Less accumulated
depreciation, including accumulated depreciation for equipment
purchased under capital leases of $13 and $206 at December 31, 2018
and 2017, respectively
|
(2,394)
|
(7,151)
|
|
$129
|
$376
|
Depreciation
expense related to property and equipment was approximately $0.13
million and $0.15 million in 2018 and 2017, respectively.
Depreciation expense includes depreciation related to capital
leases of approximately $0.002 million and $0.05 for the
periods ended December 31, 2018 and 2017, respectively. Our
capital leases have original terms of one to three years. The
principal payments for these capital leases are reflected as cash
outflows from financing activities in the accompanying consolidated
statements of cash flows. Future minimum lease payments under our
capital leases that have initial terms in excess of one year are
included in “Contractual Obligations” in Note
10.
In
connection with the closure of our Lake Mary facility in 2018, we
reclassified equipment with a net book value of approximately $0.07
million to assets held for sale. We have contracted with a third
party for the consignment sale of these assets and anticipate
completion of the sale within 12 months. For the year ended
December 31, 2018, we recognized a gain on the sale of assets held
for sale of approximately $0.01 million which is included in
selling, general and administrative expenses in the accompanying
statements of comprehensive loss.
6.
INTANGIBLE
ASSETS
Intangible
assets consisted of the following at December 31, 2018 and 2017 (in
thousands):
|
|
|
|
|
|
Patents and
copyrights
|
$18,350
|
$19,324
|
Less accumulated
amortization
|
(14,448)
|
(14,248)
|
|
$3,902
|
$5,076
|
Amortization
expense for each of the years ended December 31, 2018 and 2017
was approximately $1.1 million and $1.2 million, respectively.
For each of the years ended December 31, 2018 and 2017, we recorded
losses on the disposal of intangible assets of approximately $0.1
million.
Future
estimated amortization expense for intangible assets that have
remaining unamortized amounts as of December 31, 2018 is as
follows (in thousands):
2019
|
$713
|
2020
|
520
|
2021
|
448
|
2022
|
406
|
2023
|
359
|
2024 and
thereafter
|
1,456
|
Total
|
$3,902
|
7.
DEBT
Notes Payable
Notes
payable at December 31, 2018 and 2017, consisted of the
following (in thousands):
Description
|
|
|
Note payable to a
related party
|
$836
|
$825
|
Secured note
payable
|
2,400
|
-
|
Total
notes payable
|
3,236
|
825
|
Less
current maturities
|
2,437
|
294
|
Long-term
note payable
|
$799
|
$531
|
Note Payable to a Related Party
The
note payable to a related party represents an unsecured promissory
note to Sterne, Kessler, Goldstein, & Fox, PLLC
(“SKGF”), a related party
(see Note 14) upon conversion of outstanding and unpaid legal fees
of $0.8 million in February 2016. The note had an interest
rate of 8% per annum with an original balloon maturity of the
outstanding principal balance due on December 31, 2017. In
January 2018, we amended the note, retroactive to December 31,
2017 to allow for interest only payments through March 2018 and
principal and interest payments through March 31, 2020. In
August 2018, we further amended the note, retroactive to
April 30, 2018 to defer principal and interest payments from
May 1, 2018 through September 30, 2018. We determined
that the amendments to the note constitute modifications of the
debt which are accounted for on a prospective basis.
The
note, as modified, provided for payments of principal and interest
of approximately $48,500 per month commencing October 31, 2018
through March 31, 2020. Failure to comply with the payment
terms of this note constitutes an event of default which, if
uncured, will result in the entire unpaid principal balance of the
note and any unpaid, accrued interest to become immediately due and
payable. In addition, the note provides for an increase in the
interest rate to 12% per annum in the event of a
default.
As of
December 31, 2018, we were in default on the payment terms of the
SKGF note. In March 2019, we amended the note to provide for a
waiver of past payment defaults, a decrease in the interest rate
from 8% per annum to 4% per annum, an extension of the maturity
date of the note from March 2020 to April 2022, and a modification
of payment terms under the note (see Note 16).
Secured Note Payable
The
secured note payable represents a non-interest bearing promissory
note payable to Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
(“Mintz”) in settlement of
outstanding and unpaid legal fees and costs associated with our
patent enforcement programs. We paid Mintz an initial installment
of $0.1 million upon execution of the note and the remaining
balance is payable in monthly installments of $0.2 million
commencing November 1, 2018 and continuing until the entire
unpaid principal balance is paid. We pledged as security for the
note 25 United States (“U.S.”) patents and 6
correlating foreign patents that were simultaneously released by
Brickell Key Investments LP (“Brickell”). The Mintz
note accelerates and becomes immediately due and payable in the
case of standard events of default or in the event of a sale or
other transfer of substantially all of our assets or a transfer of
more than 50% of our capital stock in one or a series of
transactions or through a merger or other similar transaction. In
an event of default, the Mintz note will accrue interest at a rate
of 12% per annum on any outstanding balance until such time that
the note is paid in full. As of December 31, 2018, we were in
default on the payment terms of the Mintz note. The payment default
was cured in January 2019. On April 1, 2019, Mintz waived past and
future payment defaults under the note through at least May 31,
2019, provided that no other event of default occurs. Mintz also
waived acceleration of unpaid principal and interest as well as an
increase in the interest rate to the default rate of
12%.
At
December 31, 2018, the aggregate maturities of our notes
payable, after consideration of the effect of the March 2019
amendment of the SKGF note, are as follows (in
thousands):
2019
|
$2,437
|
2020
|
90
|
2021
|
93
|
2022
|
616
|
Total
|
$3,236
|
The
estimated fair value of our notes payable at December 31, 2018 is
approximately $3.0 million based on a risk-adjusted discount
rate.
Convertible Notes
In
September 2018, we sold two tranches of five-year promissory notes
for aggregate proceeds of approximately $1.3 million,
including $0.4 million sold to related parties (see Note 14).
The notes are convertible, at the holders’ option, into
shares of our common stock at fixed conversion prices. We must
repay, in cash, the principal balance of any outstanding,
unconverted notes on the five-year anniversary of the issuance
date. Accordingly, we have recognized the convertible notes as debt
in our consolidated financial statements. The fixed conversion
prices of the notes were below market value of our common stock on
the closing date resulting in a beneficial conversion feature with
a value of approximately $0.4 million. The beneficial
conversion feature is recorded as a discount on the convertible
notes with a corresponding increase to additional paid in
capital.
Convertible
notes payable at December 31, 2018 consist of the following (in
thousands):
Description
|
|
|
|
|
Convertible notes
dated September 10, 2018
|
$0.40
|
8.3%
|
September 7,
2023
|
$800
|
Convertible notes
dated September 19, 2018
|
$0.57
|
8.3%
|
September 19,
2023
|
425
|
Total principal
balance
|
|
|
|
1,225
|
Less unamortized
discount
|
|
|
|
388
|
|
|
|
|
$837
|
The
notes bear interest at a stated rate of 8% per annum. Interest is
payable quarterly and we may elect to pay interest in either cash,
shares of our common stock, or a combination thereof, subject to
certain equity conditions. For the year ended December 31, 2018, we
recognized interest expense of approximately $0.05 million,
including approximately $0.02 related to amortization of the
discount and $0.03 million related to the contractual interest
which we elected to pay in shares of our common stock. The
unamortized discount on the convertible notes will be amortized
over a remaining period of approximately 4.75 years.
At the
holders’ option, the convertible notes outstanding at
December 31, 2018 could be converted into an aggregate of
approximately 2.7 million shares of our common stock based on the
fixed conversion prices. For the year ended December 31, 2018, an
aggregate of $0.1 million in outstanding principal was converted by
the holders into 0.25 million shares of our common stock at a fixed
conversion price of $0.40.
We have
the option to prepay the notes any time following the one-year
anniversary of the issuance of the notes, subject to a premium on
the outstanding principal prepayment amount of 25% prior to the
two-year anniversary of the note issuance date, 20% prior to the
three-year anniversary of the note issuance date, 15% prior to the
four-year anniversary of the note issuance date, or 10% thereafter.
The notes provide for events of default that include failure to pay
principal or interest when due, breach of any of the
representations, warranties, covenants or agreements made by us,
events of liquidation or bankruptcy, and a change in control. In
the event of default, the interest rate increases to 12% per annum
and the outstanding principal balance of the notes plus all accrued
interest due may be declared immediately payable by the holders of
a majority of the then outstanding principal balance of the
notes.
Secured Contingent Payment Obligation
The
following table provides a reconciliation of our secured contingent
payment obligation measured at estimated fair market value for the
year ended December 31, 2018 and 2017, respectively (in
thousands).
|
|
|
Secured contingent
payment obligation, beginning of year
|
$15,896
|
$14,185
|
Proceeds from
contingent payment obligation
|
4,000
|
1,000
|
Repayment
|
-
|
-
|
Change in fair
value
|
5,661
|
711
|
Secured contingent
payment obligation, end of year
|
$25,557
|
$15,896
|
Our
secured contingent payment obligation represents the estimated fair
value of our repayment obligation to Brickell under a February 2016
funding agreement, as amended from time to time (the
“CPIA”). To date, we have
received aggregate proceeds of $18 million, including $4.0
million and $1.0 million received in 2018 and 2017, respectively,
in exchange for Brickell’s right to reimbursement and
compensation from gross proceeds resulting from patent enforcement
and other patent monetization actions. To date, we have repaid an
aggregate of $3.3 million under the CPIA from patent license and
settlement proceeds.
In
2018, we received aggregate proceeds of $4.0 million from Brickell
under the CPIA including proceeds of $2.5 million received in
December 2018. In connection with the additional proceeds received
in December 2018, we issued Brickell a warrant to purchase up to
5.0 million shares of our common stock at an exercise price of
$0.16 per share (see Note 11). As the estimated fair value of the
payment obligation to Brickell resulting from this additional
funding exceeded the $2.5 million in proceeds received, no value
was assigned to the warrants. The excess of fair value of over the
proceeds received of approximately $0.8 million was included in the
change in fair value of our contingent payment obligation in the
accompanying consolidated statement of comprehensive loss for the
year ended December 31, 2018.
Brickell
is entitled to priority payment of 100% of proceeds received from
all patent-related actions until such time that Brickell has been
repaid in full. After repayment of the funded amount, Brickell is
entitled to a portion of remaining proceeds up to a specified
minimum return which is determined as a percentage of the funded
amount and varies based on the timing of repayment. In addition,
Brickell is entitled to a pro rata portion of proceeds from
specified legal actions to the extent aggregate proceeds from those
actions exceed the specified minimum return.
Brickell
holds a senior security interest in the majority of our assets
until such time as the specified minimum return is paid, in which
case, the security interest will be released except with respect to
the patents and proceeds related to specific legal actions. The
security interest is enforceable by Brickell in the event that we
are in default under the agreement which would occur if (i) we
fail, after notice, to pay proceeds to Brickell, (ii) we become
insolvent or insolvency proceedings are commenced (and not
subsequently discharged) with respect to us, (iii) our creditors
commence actions against us (which are not subsequently discharged)
that affect our material assets, (iv) we, without Brickell’s
consent, incur indebtedness other than immaterial ordinary course
indebtedness, or (v) there is an uncured non-compliance of our
obligations or misrepresentations under the agreement. As of
December 31, 2018, we are in compliance with our obligations
under this agreement.
In
addition, in the event of a change in control of the Company,
Brickell has the right to be paid its return as defined under the
CPIA based on the transaction price for the change in control
event.
We have
elected to measure our secured contingent payment obligation at
fair value based on probability-weighted estimated cash outflows,
discounted back to present value using a discount rate determined
in accordance with accepted valuation methods (see Note 8). The
secured contingent payment obligation is remeasured to fair value
at each reporting period with changes recorded in the consolidated
statements of comprehensive loss until the contingency is
resolved.
8.
FAIR VALUE
MEASUREMENTS
ASC
820, “Fair Value Measures” establishes a fair value
hierarchy that prioritizes the inputs to valuation methods used to
measure fair value. The three levels of the fair value hierarchy
are as follows:
●
Level 1: Quoted
prices for identical assets or liabilities in active markets which
we can access
●
Level 2: Observable
inputs other than those described in Level 1
●
Level 3:
Unobservable inputs
The
following table summarizes financial assets and financial
liabilities carried at fair value and measured on a recurring basis
as of December 31, 2018 and 2017, segregated by classification
within the fair value hierarchy (in thousands):
|
|
|
|
|
Quoted Prices in
Active Markets (Level 1)
|
Significant
Other Observable Inputs (Level 2)
|
Significant
Unobservable Inputs (Level 3)
|
December
31, 2018:
|
|
|
|
|
Liabilities:
|
|
|
|
|
Secured contingent
payment obligation
|
$25,557
|
$-
|
$-
|
$25,557
|
|
|
|
|
|
|
|
|
|
|
December
31, 2017:
|
|
|
|
|
Assets:
|
|
|
|
|
Available-for-sale
securities
|
$26
|
$26
|
$-
|
$-
|
Restricted cash
equivalents
|
1,000
|
1,000
|
-
|
-
|
Liabilities:
|
|
|
|
|
Secured contingent
payment obligation
|
15,896
|
-
|
-
|
15,896
|
For the
years ended December 31, 2018 and 2017, respectively, we had
no transfers of assets or liabilities between the levels of the
hierarchy. We determine the fair value of our available-for-sale
securities and restricted cash equivalents using a market approach
based on quoted prices in active markets (Level 1
inputs).
In
2016, we recognized a secured contingent payment obligation upon
our receipt of proceeds from Brickell for funding of certain
patent-related actions. The fair value of the contingent payment
obligation at December 31, 2018 and 2017 was estimated at
$25.6 million and $15.9 million, respectively. These values
were calculated using a probability-weighted income approach based
on various cash flow scenarios as to the outcome of patent-related
actions both in terms of timing and amount, discounted to present
value using a risk-adjusted rate. The contingent payment obligation
does not have a fixed duration; however, our cash flow projections
assume a duration through 2021. The assumed cash outflows range
from $0 to $46 million and the cash flow scenarios have
probabilities of 0% to 35%. We used a risk-adjusted discount rate
of approximately 16.5%, based on a two year risk-free rate of
approximately 2.5% as adjusted by 8% for credit risk and 6% for
litigation inherent risk. Changes in any of these Level 3 inputs
could result in a higher or lower fair value measurement. For
example, a decrease in the risk-adjusted discount rate from 16.5%
to 8% would result in an increase in the fair value of
approximately $4.6 million. Refer to Note 7 for a
reconciliation of our secured contingent payment obligation
measured at estimated fair value for the years ended
December 31, 2018 and 2017.
9.
INCOME TAXES AND TAX
STATUS
Our net
losses before income taxes for the years ended December 31,
2018 and 2017 are from domestic operations as well as losses from
our wholly-owned German subsidiary. We elected to treat our German
subsidiary as a disregarded entity for purposes of income taxes and
accordingly, the losses from our German subsidiary has been
included in our operating results.
No
current or deferred tax provision or benefit was recorded in 2018
or 2017 as a result of current losses and fully deferred tax
valuation allowances for all periods. We have recorded a valuation
allowance to state our deferred tax assets at their estimated net
realizable value due to the uncertainty related to realization of
these assets through future taxable income.
On December 22, 2017, the U.S. government enacted
comprehensive tax legislation, the Tax Act. The Tax Act makes broad
and complex changes to the U.S. tax code that includes a reduction
to the U.S. federal corporate statutory tax rate to 21% effective
in 2018. The Securities and Exchange Commission
(“SEC”) staff issued Staff Accounting Bulletin
118 which provides guidance on accounting for the impact of the Tax
Act and states that a reasonable estimate of the Tax Act’s
effects on our deferred tax balances should be included in our
consolidated financial statements. As of December 31, 2017,
our accounting for the income tax effects of the Tax Act was
completed and there were no adjustments related to the Tax Act in
our reporting period ended December 31, 2018. The federal corporate
tax rate reduction created a reduction to our deferred tax assets
and liabilities with a corresponding reduction to our valuation
allowance.
A
reconciliation between the provision for income taxes and the
expected tax benefit using the federal statutory rate of 21% and
34% for the years ended December 31, 2018 and 2017,
respectively are as follows (in thousands):
|
|
|
Tax benefit at
statutory rate
|
$(4,382)
|
$(6,548)
|
State tax
benefit
|
(897)
|
(674)
|
Impact of the Tax
Act
|
-
|
41,646
|
Increase (decrease)
in valuation allowance
|
5,304
|
(34,346)
|
Research and
development credit
|
(51)
|
(129)
|
Other
|
26
|
51
|
|
$-
|
$-
|
Our
deferred tax assets and liabilities relate to the following sources
and differences between financial accounting and the tax bases of
our assets and liabilities at December 31, 2018 and 2017 (in
thousands):
|
|
|
Gross deferred tax
assets:
|
|
|
Net operating loss
carry-forward
|
$84,192
|
$82,168
|
Research and
development credit
|
7,879
|
8,051
|
Stock
compensation
|
1,027
|
1,248
|
Patents and
other
|
1,495
|
1,427
|
Contingent payment
obligation
|
2,842
|
1,409
|
Inventories
|
249
|
-
|
Fixed
assets
|
25
|
25
|
Accrued
liabilities
|
146
|
49
|
Deferred rent and
lease liabilities
|
46
|
20
|
Charitable
contributions
|
5
|
7
|
Deferred
revenue
|
-
|
5
|
Capital loss
carry-forward
|
3
|
3
|
Warranty
reserve
|
4
|
2
|
Bad debt
expense
|
-
|
1
|
|
97,913
|
94,415
|
Less valuation
allowance
|
(97,816)
|
(94,415)
|
|
97
|
-
|
Gross deferred tax
liabilities:
|
|
|
Convertible
debt
|
(97)
|
-
|
|
(97)
|
-
|
Net deferred tax
asset
|
$-
|
$-
|
Approximately
$0.1 million, net of tax effect, of unrecognized tax benefit
related to the beneficial conversion feature of convertible debt
would be recorded as an adjustment to contributed capital rather
than a decrease in earnings, if recognized.
At
December 31, 2018, we had cumulative net operating loss
(“NOL”)
carry-forwards for income tax purposes of $336.4 million, of
which $323.5 million is subject to expiration in varying amounts
from 2019 to 2036. At December 31, 2018, we also had research and
development tax credit carryforwards of $7.9 million, which
expire in varying amounts from 2019 through 2037.
Our
ability to benefit from the tax credit carry-forwards could be
limited under certain provisions of the Internal Revenue Code if
there are ownership changes of more than 50%, as defined by Section
382 of the Internal Revenue Code of 1986 (“Section 382”). Under
Section 382, an ownership change may limit the amount of NOL,
capital loss and R&D credit carry-forwards that can be used
annually to offset future taxable income and tax, respectively. In
general, an ownership change, as defined by Section 382, results
from transactions increasing the ownership of certain shareholders
or public groups in the stock of a corporation by more than 50
percentage points over a three-year period. We conduct a
study annually of our ownership changes. Based on the results of
our studies, we have determined that we do not have any ownership
changes on or prior to December 31, 2018 which would result in
limitations of our NOL, capital loss or R&D credit
carry-forwards under Section 382.
Uncertain Tax Positions
We file
income tax returns in the U.S. federal jurisdiction and various
state jurisdictions. We have identified our Federal and
Florida tax returns as our only major jurisdictions, as
defined. The periods subject to examination for those returns
are the 1998 through 2018 tax years. The following table
provides a reconciliation of our unrecognized tax benefits due to
uncertain tax positions for the years ended December 31, 2018
and 2017, respectively (in thousands).
|
|
|
Unrecognized tax
benefits – beginning of year
|
$927
|
$1,370
|
Impact of the Tax
Act
|
-
|
(443)
|
Unrecognized tax
benefits – end of year
|
$927
|
$927
|
Future
changes in the unrecognized tax benefit will have no impact on the
effective tax rate so long as we maintain a full valuation
allowance.
Our
policy is that we recognize interest and penalties accrued on any
unrecognized tax benefits as a component of our income tax
expense. We do not have any accrued interest or penalties
associated with any unrecognized tax benefits. For the years
ended December 31, 2018 and 2017, we did not incur any income
tax-related interest income, expense or
penalties.
10.
COMMITMENTS AND
CONTINGENCIES
Lease Commitments
The
following table presents a summary of our facilities under
non-cancelable lease agreements at December 31,
2018:
Description
|
|
|
Renewal options
remaining
|
Straight line
monthly rental payment (in thousands)
|
Corporate office,
Jacksonville, Florida
|
7/15/2018
|
7/31/2019
|
none
|
$31
|
Wireless design
facility, Lake Mary, Florida
|
7/1/2017
|
11/30/2022
|
2 options to extend
for 36 months each
|
$13
|
Warehouse and
production facility, Jacksonville, Florida
|
7/1/2017
|
7/31/2020
|
none
|
$2
|
Deferred
rent is amortized to rent expense over the respective lease terms.
In addition to sales tax payable on base rental amounts, certain
leases obligate us to pay pro-rated annual operating expenses for
the properties. Rent expense for our facilities for the years ended
December 31, 2018 and 2017 was approximately $0.5 million and
$0.6 million, respectively.
Contractual Obligations
Future
minimum lease payments under all non-cancelable operating leases
and capital leases that have initial terms in excess of one year as
of December 31, 2018 were as follows (in
thousands):
Contractual
obligations:
|
|
|
|
|
Operating
leases
|
$372
|
$191
|
$345
|
$908
|
Capital
leases
|
$2
|
$1
|
$-
|
$3
|
Our
contractual obligations as of December 31, 2018 for operating
leases include approximately $0.7 million related to our Lake Mary,
Florida facility. We ceased use of this facility in 2018 and at
December 31, 2018, we have recorded a lease liability of $0.2
million which reflects the estimated net present value of our Lake
Mary lease obligation, net of estimated future sublease rental
income.
Legal Proceedings
We are
a party to a number of patent enforcement actions initiated by us
against others for the infringement of our technologies, as well as
counter claims and proceedings brought by others against us in an
attempt to invalidate certain of our patent claims. These
patent-related proceedings are more fully described
below. We have 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. If we determine it is
probable that we will have an unfavorable outcome in any of our
German cases, we record an estimate of expenses for the probable
loss. We received an unfavorable decision from Germany in October
2018, as more fully described below (see Qualcomm v. ParkerVision – Federal
Patent Court in Germany). As a result, for the year ended
December 31, 2018, we have recorded an aggregate of $0.1 million in
expenses for statutory fees and costs estimated in that case. There
is at least a reasonable possibility of an unfavorable outcome in
any one or more of our legal proceedings that could result in
expenses in the aggregate that could have a material unfavorable
impact on our results of operations as more fully discussed
below.
ParkerVision v. Qualcomm and HTC (Middle District of
Florida)
We have
a patent infringement complaint pending in the Middle District of
Florida against Qualcomm and Qualcomm Atheros, Inc. (collectively
“Qualcomm”), and HTC (HTC
Corporation and HTC America, Inc.) (the “Qualcomm Action”) seeking
unspecified damages and injunctive relief for infringement of
certain of our patents. Certain of the defendants have filed
counterclaims against us for non-infringement and invalidity for
all patents in the case. A claim construction hearing was held in
August 2015 but no ruling on claim construction has been issued by
the court. In February 2016, the court granted the parties’
joint motion to stay these proceedings until resolution of the
proceedings at the International Trade Commission
(“ITC”)
as discussed below. In May 2017, the stay of these proceedings was
continued pending an appeal of certain Patent Trial and Appeal
Board (“PTAB”) decisions with
regard to our U.S. Patent 6,091,940 (“the ‘940 Patent”).
In September 2018, the Federal Circuit issued its decision in the
appeal of the ‘940 Patent as discussed in Qualcomm v. ParkerVision – PTAB
below. Accordingly, in January 2019, the court lifted the stay. A
trial schedule has not yet been set for this case.
Qualcomm v. ParkerVision -PTAB
In
August 2015, Qualcomm filed an aggregate of ten petitions for
Inter Partes Review
(“IPR”)
with the PTAB seeking to invalidate certain claims related to three
of the eleven patents originally asserted in our Qualcomm Action.
In March 2016, the PTAB issued decisions denying institution of
trial for three of the petitions, all of which relate to our U.S.
patent 7,039,372 (“the ‘372 Patent”).
The remaining petitions, all of which relate to the ‘940
Patent and U.S. patent 7,966,012 (“the ‘012 Patent”)
were instituted for trial by the PTAB. In May 2016, the PTAB
granted our motion to disclaim the challenged claims of the
‘012 Patent and entered an adverse judgment against us with
respect to those claims. In March 2017, the PTAB issued its
decisions on the six outstanding IPRs, all of which relate to the
‘940 Patent. The PTAB ruled in our favor on three of the six
petitions, ruled in Qualcomm’s favor on two of the six
petitions and issued a split decision on the claims covered in the
sixth petition. As a result of the PTAB decisions, certain claims
of the ‘940 Patent were found to be un-patentable and certain
claims were found not to be un-patentable. In May 2017, we filed a
notice of appeal of these decisions with the United States Court of
Appeals for the Federal Circuit (“CAFC”). Qualcomm also
appealed the decisions that were unfavorable to them. On
September 13, 2018, the CAFC upheld the PTAB ruling with
regard to the ‘940 Patent. As a result of the ruling, we
prevailed with regard to the method claims of the ‘940 Patent
and Qualcomm prevailed on the apparatus claims. This matter is now
closed although the patents at issue in this proceeding are the
subject of the Qualcomm Action discussed above.
ParkerVision v. Apple and Qualcomm (ITC)
In
December 2015, we filed a complaint with the U.S. ITC against
Apple, Inc., LG Electronics, Inc., LG Electronics U.S.A., Inc., and
LG Electronics MobileComm U.S.A., Inc. (collectively
“LG”),
Samsung Electronics Co., Ltd., Samsung Electronics America, Inc.,
and Samsung Semiconductor, Inc. (collectively “Samsung”) and Qualcomm
alleging that these companies make, use or sell products that
infringe certain of our patent claims and requesting that the ITC
bar the defendants from continuing to import and sell infringing
products in the U.S. We filed a corresponding patent infringement
complaint in the Middle District of Florida against these same
defendants. In January 2016, the ITC instituted an investigation
based on our complaint. In July 2016, we entered into a
confidential patent license and settlement agreement with Samsung
and, as a result, Samsung was removed from the ITC action. In
January 2017, we dismissed three of the four patents from the case
in order to simplify the investigation. On March 10, 2017, the
administrative law judge issued a ruling on a pre-trial motion that
precluded us from presenting key evidence in our case. As a result,
on March 13, 2017, we filed a motion to terminate the
proceedings at the ITC. On April 28, 2017, the ITC granted our
motion to withdraw from the ITC proceedings.
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 the
corresponding case filed at the 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, and we are currently
awaiting the court’s decision regarding claim language
pertinent to this case. We anticipate that a trial date will be
scheduled for this proceeding following the court’s order
regarding claim construction.
ParkerVision v. LG (District of New Jersey)
In July
2017, we filed a patent infringement complaint in the district of
New Jersey against LG for the alleged infringement of the same
patents previously asserted against LG in the middle district of
Florida (see ParkerVision v. Apple
and Qualcomm above). We elected to dismiss the case in the
middle district of Florida and re-file in New Jersey as a result of
a recent Supreme Court ruling regarding proper venue. In March
2018, the court stayed this case pending a final decision in
ParkerVision v. Apple and
Qualcomm 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”).
A hearing in this case was held in November 2016 at which time the
court concluded that certain LGE products using Qualcomm RF
circuitry infringe our patent. The final decision in this case was
stayed pending resolution of the corresponding nullity, or
validity, action filed by Qualcomm in the German Federal Patent
Court in Munich (see Qualcomm v.
ParkerVision below). In October 2018, we received an
unfavorable decision in the nullity case for which we have filed an
appeal. The outcome of our appeal of the nullity action will
determine the outcome of this action. If our appeal is
unsuccessful, we will be subject to a claim for reimbursement of
statutory attorney’s fees and costs in this case. We estimate
a claim of approximately $0.06 million for which we have
posted a bond. The cost of the bond is included in “Prepaid
expenses” in the accompanying consolidated balance sheets and
will be charged to expense if a loss becomes probable.
ParkerVision v. Apple (Munich, Germany) - the Apple I
case
In
October 2016, we filed a complaint in Munich District Court against
Apple, Inc., Apple Distribution International, and Apple Retail
Germany B.V. & Co. KG (collectively “Apple”) seeking damages
and injunctive relief for the alleged infringement of the
‘831 Patent (the “Apple I Case”). In
February 2017, we amended our complaint adding the infringement of
a second German patent and alleging infringement by Apple devices
that incorporate an Intel transceiver chip. The Munich Regional
Court bifurcated the new claims into a second case (see
ParkerVision v. Apple - the Apple
II case below). A hearing was held in May 2017 in the Apple
I Case. In June 2017, the court deferred its ruling pending the
decision from the German Federal Patent Court in the validity
action filed by Qualcomm (see Qualcomm v. ParkerVision below). In
October 2018, we received an unfavorable decision in the nullity
case for which we have filed an appeal. We have not posted a bond
to cover the potential statutory costs in this case. In March 2019,
the district court declared the complaint withdrawn, a decision we
are able to appeal provided we post a bond for approximately $0.1
million by April 2019. If we fail to post a bond or our appeal of
the nullity action is unsuccessful, we will be subject to a claim
for reimbursement of statutory attorney’s fees and costs of
approximately $0.1 million. The accompanying consolidated
financial statements do not include any accrual for a loss
contingency in this case as the loss is not considered probable as
of December 31, 2018.
Qualcomm v. ParkerVision -Federal Patent Court in Germany (as
appealed to the German Supreme Court)
In
August 2016, Qualcomm 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. Based on the October 2018 decision from the
federal court, we have accrued a contingent loss of $0.1 million
for the estimated statutory fees and costs in this case. In January
2019, we appealed this decision to the German Supreme Court. Dates
have not yet been established for the appeal. If we ultimately do
not prevail in this case, in addition to the contingent loss
recorded at December 31, 2018, we will be subject to a claim for
reimbursement of statutory attorney fees and costs for the appeal
which we estimate to be approximately $0.1 million. In addition, we
may be subject to claims for reimbursement of statutory attorney
fees and costs for the LG and Apple I cases that are stayed pending
this validity decision. We estimate these possible additional costs
to be approximately $0.2 million, a portion of which is covered by
a $0.06 million bond we have posted in the LG case.
ParkerVision v. Apple (Munich, Germany)-the Apple II
case
The
Apple II case seeks damages and injunctive relief for the alleged
infringement of the German part of our European patent 1 135 853
(“the ‘853
Patent”). A preliminary hearing was held in November
2017. Subsequent to the hearing, the court requested that we
supplement certain elements of the infringement claims against
Apple devices. In May 2018, we filed our supplemental briefs as
requested by the court. In October 2018, we also filed a
supplemental expert report. The court appointed an expert in this
case and a hearing was held in March 2019 for purposes of providing
expert testimony. The court is expected to rule in April 2019. We
have posted a bond of approximately $0.14 million which is our
estimated maximum exposure in this case. The cost of the bond is
included in “Prepaid expenses” in the accompanying
consolidated balance sheets as of December 31, 2018.
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. If the ‘853 Patent is declared
invalid, we may be subject to a claim for reimbursement of
statutory attorney fees and costs in this case which we currently
estimate will not exceed $0.1 million. No dates have yet been
set in this nullity action, and the accompanying consolidated
financial statements do not include any accrual for a loss
contingency in this case as a loss is not considered probable as of
December 31, 2018.
11.
STOCK AUTHORIZATION AND
ISSUANCE
Preferred Stock
We have
15 million shares of preferred stock authorized for issuance
at the direction of the board of directors (the “Board”). On
November 17, 2005, our Board designated 0.1 million
shares of authorized preferred stock as the Series E Preferred
Stock in conjunction with its adoption of a Shareholder Protection
Rights Agreement. As of December 31, 2018, we had no
outstanding preferred stock.
Common Stock
We have 75 million shares of common stock authorized for issuance.
Our shareholders approved an amendment to our articles of
incorporation in 2017 to increase the number of authorized shares
of common stock from 20 million to 30 million
shares. In addition, on June 12, 2018, our shareholders
approved an
amendment to our articles of incorporation to increase the number
of authorized shares of common stock from 30 million to
40 million shares and on October 30, 2018, our
shareholders approved an amendment to our articles of incorporation
to increase the number of our authorized shares of common stock
from 40 million to 75 million shares.
As of
December 31, 2018, we have 14.5 million shares reserved for
issuance under outstanding warrants, options and unvested RSUs, 0.3
million shares reserved for future issuance under shareholder
approved equity compensation plans, and 6.0 million shares reserved
for the payment of interest and conversion of principal under
outstanding convertible notes.
Stock Issuances
The
following table presents a summary of completed equity offerings
for the years ended December 31, 2018 and 2017 (in thousands,
except for per share amounts):
|
|
# of Common
Shares/ Units Sold
|
Average Price
per Share/Unit
|
# of Warrants
Issued(in 000’s)
|
Average Exercise
Price per Warrant
|
|
July 2018 and
September 2018
|
Offerings under
PIPE Agreement
|
-
|
-
|
10,000
|
$0.38
|
$1,901
|
March
2018
|
Director Stock
Purchase
|
217
|
$0.83
|
-
|
-
|
$180
|
March - May
2018
|
Offerings under
ATM
|
1,359
|
$0.87
|
-
|
-
|
$1,148
|
January - June
2018
|
Offerings under
Equity Line Agreement
|
2,940
|
$0.70
|
-
|
-
|
$2,047
|
October - December
2017
|
Offerings under
Equity Line Agreement
|
773
|
$1.29
|
-
|
-
|
$958
|
August - December
2017
|
Offerings under
ATM
|
2,119
|
$1.50
|
-
|
-
|
$2,970
|
February
2017
|
Director Stock
Purchase
|
81
|
$2.11
|
-
|
-
|
$170
|
January - March
2017
|
Offerings under
ATM
|
4,072
|
$2.46
|
-
|
-
|
$9,581
|
(1)
After deduction of
applicable underwriters’ discounts, placement agent fees, and
other offering costs.
Private Placement with Aspire Capital
In July
2018, we entered into a securities purchase agreement (the
“PIPE
Agreement”) with Aspire Capital for the sale of up to
$2.0 million of shares of our common stock (or pre-funded
warrants) and warrants, in two tranches. Upon the initial closing,
we sold to Aspire Capital (i) a pre-funded warrant to purchase up
to 2.5 million shares of our common stock with an exercise
price of $0.01 per share (“Pre-Funded Warrant”) and
(ii) a warrant to purchase up to 2.5 million shares of our
common stock with an exercise price of $0.74 per share (a
“Warrant”), for an
aggregate purchase price of approximately $1.0 million. In
addition, pursuant to the PIPE Agreement, in September 2018, we
sold to Aspire Capital (i) a second Pre-Funded Warrant to purchase
up to 2.5 million shares of common stock exercise price of
$0.01 per share and (ii) a second Warrant to purchase an additional
2.5 million shares of common stock at an exercise price of
$0.74 per share, for an additional aggregate purchase price of
approximately $1.0 million. The aggregate proceeds from the
sale of Pre-Funded Warrants and Warrants to Aspire Capital are $1.9
million after deduction of legal fees and registration costs of
approximately $0.05 million. The Warrants and Pre-Funded Warrants
expire five years after their respective issuance date and have
substantially similar other terms, except (i) for exercise price
and (ii) that the Warrants are exercisable on the date that is six
months after issuance and the Pre-Funded Warrants are immediately
exercisable after issuance. The shares underlying the Pre-Funded
Warrants and Warrants are registered under a registration statement
that became effective in September 2018 (Registration
No.333-226738).
At Market Issuance Sales Agreements
We filed a shelf registration statement on Form S-3 with the SEC in
November 2016 (Registration No. 333-214598) for the offering
of various securities, up to $15 million, over a period of up
to three years. On December 30, 2016, we entered into an At
Market Issuance Sales Agreement (“ATM”) with FBR Capital Markets & Co.
(“FBR”) for the sale of up to $10 million in
shares of our common stock under the shelf registration statement
(the “First
ATM”). From
January through March 2017, we sold an aggregate of
4.1 million shares of our common stock at an average price of
$2.46 per share under the First ATM for net proceeds of
approximately $9.6 million, after deduction of approximately $0.4
million in FBR fees and commissions, legal fees and other offering
costs.
On
August 14, 2017, we entered into a new ATM agreement with FBR
for the sale of up to approximately $4.4 million in shares of
our common stock registered under the shelf registration statement
(the “Second
ATM”). From August to December 2017, we completed
the sale of approximately 2.1 million shares of our common
stock at an average price of $1.50 under the Second ATM for net
proceeds of approximately $3.0 million, after deduction of
approximately $0.2 million in FBR fees and commissions, legal fees
and other offering costs. From March to May 2018, we completed the
sale of approximately 1.4 million shares of our common stock at an
average price of $0.87 per share under the Second ATM for aggregate
net proceeds of approximately $1.1 million, after deduction of
approximately $0.1 million in FBR fees and commissions. We had no
additional amounts available under the shelf registration statement
as of December 31, 2018.
Equity Line Agreement
In
October 2017, we entered into a common stock purchase agreement
(the “Equity Line
Agreement”) with Aspire Capital. Under the Equity Line
Agreement, Aspire Capital committed to purchase up to an aggregate
of $20 million in shares of our common stock over the 30-month
term of the Equity Line Agreement. In consideration for entering
into the Equity Line Agreement, we issued to Aspire Capital
approximately 0.3 million shares of our common stock as a
commitment fee. We filed a registration statement to register the
sale of up to 4 million shares of our common stock by Aspire
Capital under the Equity Line Agreement. The registration statement
was declared effective November 27, 2017 (File No.
333-221250).
Under
the Equity Line Agreement, on any trading day selected by us, we
have the right, in our sole discretion, to present Aspire Capital
with a purchase notice, directing Aspire Capital to purchase up to
0.15 million shares of our common stock, provided that the
aggregate purchase amount for such shares does not exceed
$0.5 million and subject to the maximum aggregate amount of
$20 million. The per share purchase price for each purchase
notice is equal to the lesser of (i) the lowest sale price of our
common stock on the purchase date; or (ii) the arithmetic average
of the three lowest closing sale prices for our common stock during
the ten consecutive trading days ending on the trading day
immediately preceding the purchase date.
In
addition, on any date on which we submit a purchase notice to
Aspire Capital, we also have the right, in our sole discretion, to
present Aspire Capital with a volume-weighted average price
(“VWAP”) purchase notice
directing Aspire Capital to purchase an amount of stock equal to up
to 30% of the aggregate shares of our common stock traded on its
principal market on the next trading day, or such lesser amount as
we may determine. The purchase price per share pursuant to the VWAP
purchase notice is generally 97% of the
volume-weighted average price for our common stock traded on its
principal market on the VWAP purchase date, subject to terms and
limitations of the agreement.
The
number of shares that may be issued to Aspire Capital under the
Equity Line Agreement was limited to that number of shares
representing 19.99% of our pre-transaction shares outstanding (the
“Exchange
Cap”), unless shareholder approval was obtained or
unless the average price for shares sold in excess of the Exchange
Cap is equal or greater to $1.48 which represents the closing bid
price of our common stock at the date we entered into the Equity
Line Agreement. In June 2018, our shareholders approved the
issuance of shares to Aspire Capital under the Equity Line
Agreement in excess of 19.99% of our pre-transaction shares
outstanding.
In
2017, we sold an aggregate of 0.77 million shares of our common
stock to Aspire Capital under the Equity Line Agreement for
aggregate net proceeds of approximately $0.96 million after
deduction of legal and other offering costs of approximately $0.04
million. From January 2018 to June 2018, we sold an aggregate of
2.9 million shares of our common stock to Aspire Capital under the
Equity Line Agreement for aggregate net proceeds of approximately
$2.0 million. As of December 31, 2018, we had no registered shares
available under the Equity Line Agreement. Upon registration of
additional shares, and subject to the terms and conditions of the
Equity Line Agreement, including a $0.50 per share minimum price,
we have $16.9 million remaining under the Equity Line
Agreement.
Director Stock Purchases
On
March 26, 2018, three of our directors purchased an aggregate of
0.2 million shares of our common stock in an unregistered sale of
equity securities at a purchase price of $0.83 per share. In
February 2017, one of our directors purchased 0.1 million shares of
our common stock in an unregistered sale of equity securities at a
purchase price of $2.11 per share. Director purchases of our common
stock were made at or above market price at the date of purchase
(see Note 14).
Stock for Services
For the
year ended December 31, 2017, we issued an aggregate of
0.3 million shares of unregistered common stock to two
consultants in exchange for an aggregate of approximately
$0.4 million in prepaid retainers for executive consulting and
other advisory services. We have no registration obligation with
respect to these shares.
Common Stock Warrants
In
December 2018, we issued a warrant for the purchase of up to 5.0
million shares of our common stock at $0.16 per share to Brickell
in connection with an amendment to the CPIA (see Note 7). The CPIA
is recorded as a liability at its estimated fair value. At the
transaction date, the estimated fair value of the liability to
Brickell exceeded the net proceeds received from Brickell.
Accordingly, no value was assigned to the warrants issued in
connection with the transaction. The warrant is immediately
exercisable, expires five years from the date of issuance and
includes cashless exercise and registration rights. The shares
underlying the warrant have not yet been registered.
As of
December 31, 2018, we had outstanding warrants for the
purchase of up to 13.3 million shares of our common stock,
including Pre-Funded Warrants for the purchase of up to 2.9 million
shares of our common stock. The estimated grant date fair value of
these warrants of $1.8 million and $0.8 million at December
31, 2018 and 2017, respectively, is included in shareholders’
deficit in our consolidated balance sheets. As of December 31,
2018, our outstanding warrants have an average exercise price of
$0.39 per share and a weighted average remaining life of
approximately five years.
For the
year ended December 31, 2018, we issued approximately 2.0 million
shares of our common stock upon cashless exercise of 2.1 million
Pre-Funded Warrants. In addition, a warrant for the purchase of
0.07 million shares with an exercise price of $3.25 per share
expired unexercised in 2018. There were no warrant exercises or
expirations for the year ended December 31, 2017 and no cash
received from warrant exercises for 2018 or 2017.
Shareholder Protection Rights Agreement
On
November 20, 2015, we amended our Shareholder Protection
Rights Agreement (“Rights Agreement”) dated
November 21, 2005. The amendment extends the expiration date
of the Rights Agreement from November 21, 2015 to
November 20, 2020 and decreases the exercise price of the
rights to $14.50 after giving effect to the one-for-ten reverse
stock split that became effective March 30, 2016.
The
Rights Agreement provided for the issuance, on November 29,
2005, as a dividend, rights to acquire fractional shares of Series
E Preferred Stock. We did not assign any value to the dividend as
the value of these rights is not believed to be objectively
determinable. The principal objective of the Rights Agreement is to
cause someone interested in acquiring us to negotiate with our
Board rather than launch an unsolicited or hostile bid. The Rights
Agreement subjects a potential acquirer to substantial voting and
economic dilution. Each share of common stock issued by
ParkerVision will include an attached right.
The
rights initially are not exercisable and trade with the common
stock of ParkerVision. In the future, the rights may become
exchangeable for shares of Series E Preferred Stock with various
provisions that may discourage a takeover bid. Additionally, the
rights have what are known as “flip-in” and
“flip-over” provisions that could make any acquisition
of us more costly to the potential acquirer. The rights may
separate from the common stock following the acquisition of 15% or
more of the outstanding shares of common stock by an acquiring
person. Upon separation, the holder of the rights may exercise
their right at an exercise price of $14.50 per right (the
“Exercise
Price”), subject to adjustment and payable in cash.
Upon payment of the Exercise Price, the holder of the right will
receive from us that number of shares of common stock having an
aggregate market price equal to twice the Exercise Price, as
adjusted. The Rights Agreement also has a flip over provision
allowing the holder to purchase that number of shares of
common/voting equity of a successor entity, if we are not the
surviving corporation in a business combination, at an aggregate
market price equal to twice the Exercise Price. We have the right
to substitute for any of our shares of common stock that we are
obligated to issue, shares of Series E Preferred Stock at a ratio
of one ten-thousandth of a share of Series E Preferred Stock for
each share of common stock. The Series E Preferred Stock, if and
when issued, will have quarterly cumulative dividend rights payable
when and as declared by the Board, liquidation, dissolution and
winding up preferences, voting rights and will rank junior to other
securities of ParkerVision unless otherwise determined by the
Board.
The
rights may be redeemed upon approval of the Board at a redemption
price of $0.01.
12.
SHARE-BASED
COMPENSATION
The
following table presents share-based compensation expense included
in our consolidated statements of comprehensive loss for the years
ended December 31, 2018 and 2017, respectively (in
thousands):
|
|
|
Research and
development expense
|
$169
|
$564
|
Selling, general,
and administrative expense
|
831
|
1,600
|
Restructuring
expense
|
50
|
-
|
Total
share-based compensation expense
|
$1,050
|
$2,164
|
We did
not capitalize any expense related to share-based payments. As of
December 31, 2018, there was $0.2 million of total
unrecognized compensation cost related to all non-vested
share-based compensation awards. That cost is expected to be
recognized over a weighted-average period of approximately one
year.
Stock Incentive Plans
2011 Long-Term Incentive Equity Plan
We
adopted a long-term incentive equity plan in September 2011 that,
as amended in 2014, 2016 and 2017, provided for the grant of
stock-based awards to employees, officers, directors and
consultants, not to exceed 3.0 million shares of common stock
(the “2011
Plan”). The 2011 Plan provides for benefits in the
form of incentive stock options, nonqualified stock options, stock
appreciation rights, restricted stock awards, and other stock based
awards. Forfeited and expired options under the 2011 Plan become
available for reissuance. The plan provides that no participant may
be granted awards in excess of 150,000 shares in any calendar year.
At December 31, 2018, 296,952 shares of common stock were
available for future grants under the 2011 Plan.
2008 Equity Incentive Plan
We
adopted an equity incentive plan in August 2008 (the
“2008
Plan”). The 2008 Plan provides for the grant of
stock-based awards to employees (excluding named executives),
directors and consultants, not to exceed 50,000 shares of common
stock. The 2008 Plan provides for benefits in the form of incentive
stock options, nonqualified stock options, stock appreciation
rights, restricted stock awards, and other stock based awards.
Forfeited and expired options under the 2008 Plan become available
for reissuance. The plan provides that no participant may be
granted awards in excess of 5,000 shares in any calendar year. At
December 31, 2018, 19,673 shares of common stock were
available for future grants under the 2008 Plan.
2000 Performance Equity Plan
We
adopted a performance equity plan in July 2000 (the
“2000
Plan”). The 2000 Plan provided for the grant of
options and other stock awards to employees, directors and
consultants, not to exceed 500,000 shares of common stock. The 2000
Plan provided for benefits in the form of incentive and
nonqualified stock options, stock appreciation rights, restricted
stock awards, stock bonuses and various stock benefits or cash. No
additional awards may be granted under this plan.
Restricted Stock Awards
RSAs
are issued as executive and employee incentive compensation and as
payment for services to others. The value of the award is based on
the closing price of our common stock on the date of grant. RSAs
are generally immediately vested.
Restricted Stock Units
RSUs
are issued as incentive compensation to executives, employees, and
non-employee directors as well as payment for services to third
parties. Each RSU represents a right to one share of our common
stock, upon vesting. The RSUs are not entitled to voting rights or
dividends, if any, until vested. RSUs generally vest over a one to
three year period for employee awards, a one year period for
non-employee director awards and the life of the related service
contract for third-party awards. The fair value of RSUs is
generally based on the closing price of our common stock on the
date of grant and is amortized to share-based compensation expense
over the estimated life of the award, generally the vesting period.
In the case of RSUs issued to third parties, the fair value is
recognized based on the closing price of our common stock on each
vesting date.
RSAs and RSUs
The
following table presents a summary of RSA and RSU activity under
the 2000, 2008, and 2011 Plans (collectively, the
“Stock
Plans”) as of December 31, 2018 (shares in
thousands):
|
|
|
|
Weighted-Average
Grant Date Fair
Value
|
Non-vested at
beginning of year
|
521
|
$1.98
|
Granted
|
221
|
0.37
|
Vested
|
(629)
|
1.42
|
Forfeited
|
(99)
|
1.94
|
Non-vested at end
of year
|
14
|
$1.98
|
The total fair value of RSAs and RSUs vested under the Stock Plans
for the year ended December 31, 2018 is
$0.3 million.
Stock Options
Stock
options are issued as incentive compensation to executives,
employees, non-employee directors, and third parties. Stock options
are generally granted with exercise prices at or above fair market
value of the underlying shares at the date of grant. The fair value
of options granted is estimated using the Black-Scholes option
pricing model. Generally, fair value is determined as of the grant
date. In the case of option grants to third parties, the fair value
is estimated at each interim reporting date until vested. Options
for employees, including executives and non-employee directors, are
generally granted under the Stock Plans.
The
following table presents a summary of option activity under the
Stock Plans for the year ended December 31, 2018 (shares in
thousands):
|
|
Weighted-Average
Exercise Price
|
Weighted-Average
Remaining Contractual Term
|
Aggregate
Intrinsic Value ($)
|
Outstanding at
beginning of year
|
1,007
|
$10.82
|
|
|
Granted
|
507
|
0.60
|
|
|
Exercised
|
-
|
-
|
|
|
Forfeited
|
(42)
|
1.59
|
|
|
Expired
|
(244)
|
9.96
|
|
|
Outstanding at end
of year
|
1,228
|
7.09
|
4.66 years
|
$-
|
Vested and expected
to vest at end of year
|
849
|
$9.98
|
3.73 years
|
$-
|
|
|
|
|
|
The
weighted average per share fair value of option shares granted
during the years ended December 31, 2018 and 2017 was $0.46
and $1.52, respectively. The total fair value of option shares
vested was $0.5 million and $0.2 million for the years ended
December 31, 2018 and 2017, respectively.
The
fair value of option grants under the Stock Plans for the years
ended December 31, 2018 and 2017, respectively, was estimated
using the Black-Scholes option-pricing model with the following
assumptions:
|
|
|
|
|
Expected option
term 1
|
|
|
Expected volatility
factor 2
|
|
|
Risk-free interest
rate 3
|
|
|
Expected annual
dividend yield
|
0.0%
|
0.0%
|
|
|
|
1 The expected term
was generally determined based on historical activity for grants
with similar terms and for similar groups of employees and
represents the period of time that options are expected to be
outstanding. For employee options, groups of employees with similar
historical exercise behavior are considered separately for
valuation purposes. For consultants, the expected term was
determined based on the contractual life of the award.
2 The stock volatility
for each grant is measured using the weighted average of historical
daily price changes of our common stock over the most recent period
equal to the expected option life of the grant.
3 The risk-free
interest rate for periods equal to the expected term of the share
option is based on the U.S. Treasury yield curve in effect at the
measurement date.
Options by Price Range
The
options outstanding at December 31, 2018 under all plans have
exercise price ranges, weighted average contractual lives, and
weighted average exercise prices are as follows (weighted average
lives in years and shares in thousands):
|
|
|
|
Number
Outstanding at December 31, 2018
|
|
Wtd. Avg.
Remaining Contractual Life
|
Number
Exercisable at December 31, 2018
|
|
Wtd. Avg.
Remaining Contractual Life
|
$0.60 - $1.23
|
502
|
$0.60
|
6.71
|
127
|
$0.61
|
6.65
|
$1.80 - $13.20
|
459
|
2.43
|
4.65
|
455
|
2.43
|
4.64
|
$13.80 - $22.60
|
28
|
14.05
|
2.48
|
28
|
14.05
|
2.48
|
$23.80 - $38.80
|
230
|
28.25
|
0.55
|
230
|
28.25
|
0.55
|
$45.10 - $45.10
|
9
|
45.10
|
1.96
|
9
|
45.10
|
1.96
|
|
1,228
|
$7.09
|
4.66
|
849
|
$9.98
|
3.73
|
Upon
exercise of options under all plans, we issue new shares of our
common stock. For shares issued upon exercise of equity awards
granted under the Stock Plans, the shares of common stock are
registered. For shares issued upon exercise of non-plan awards, the
shares are not registered unless they have been subsequently
registered by us on a registration statement. We had no option
exercises for the years ended December 31, 2018 or
2017.
13.
RESTRUCTURING
CHARGES
In
August 2018, as a result of our limited capital resources, our
Board approved plans to reduce our ongoing operating expenses,
including a reduction in workforce of approximately 30 employees
and closure of our engineering design facility in Lake Mary,
Florida. As a result of the cost reduction measures, we ceased any
ongoing integrated circuit design activities and significantly
reduced our sales and marketing expenditures with respect to our
Milo products. Expenses related to our restructuring are included
in operating expenses in our consolidated statements of
comprehensive loss under the heading “Restructuring
charges.”
Restructuring
charges for the year ended December 31, 2018 include the following
(in thousands):
|
|
One-time
termination benefits
|
$135
|
Lease
expense
|
163
|
Asset impairment
charges
|
375
|
Other
|
17
|
|
$690
|
Termination Benefits
Accrued
one-time termination benefits consist of the following (in
thousands):
|
|
Accrued termination
benefits, beginning of period
|
$-
|
Termination
benefits recognized
|
135
|
Termination
benefits settled
|
(115)
|
Accrued termination
benefits, end of period
|
$20
|
Lease Payable
In
connection with the cease-use date of our Lake Mary, Florida
facility, we recorded a lease payable for the estimated fair value
of remaining lease rental payments, less estimated sublease
rentals, net of deferred rent. Our lease payable consists of the
following (in thousands):
|
|
Lease payable,
beginning of period
|
$-
|
Present value of
future minimum lease payments less estimated future
sublease rentals, net of deferred rent of $62
|
182
|
Settlements
|
(48)
|
Change in
estimate
|
43
|
Lease payable, end
of period
|
177
|
Current portion of
lease payable
|
86
|
Long-term portion
of lease payable
|
$91
|
14.
RELATED PARTY
TRANSACTIONS
We paid
approximately $0.03 million and $0.03 million in 2018 and
2017, respectively, for patent-related legal services to SKGF, of
which Robert Sterne, one of our directors since September 2006, is
a partner. In addition, we paid approximately $0.06 million
and $0.07 million in 2018 and 2017, respectively for principal
and interest on an unsecured note payable to SKGF (the
“SGKF
Note”). The SKGF Note was issued in 2016, to convert
outstanding unpaid fees to an unsecured promissory note. The SKGF
Note was amended in January 2018 and August 2018 to defer principal
payments. The SKGF Note allows for interest at 8% per annum and
matures on March 31, 2020. At December 31, 2018, the outstanding
balance of the note, including accrued and unpaid interest is
approximately $0.8 million (see Note 7).
On
September 10, 2018, we sold an aggregate of $0.4 million
in promissory notes, convertible into shares of our common stock at
a fixed conversion price of $0.40 to related parties on the same
terms as other convertible notes sold in the same transaction (see
Note 7). Jeffrey Parker, our chief executive officer and chairman
of the Board, Paul Rosenbaum, one of our directors since December
2016, and incoming independent director, Lewis Titterton, each
purchased a convertible note with a face value of
$0.1 million. In addition, Stacie Wilf, sister to Jeffrey
Parker, purchased a convertible note with a face value of
$0.1 million.
On
March 26, 2018, three of our directors purchased an aggregate of
0.2 million shares of our common stock in an unregistered sale of
equity securities at a purchase price of $0.83 per share, which
represented the closing bid price of our common stock on the
purchase date. In February 2017, one of our directors, Mr. Paul
Rosenbaum, purchased approximately 0.1 million shares of our common
stock in an unregistered sale of equity securities at a purchase
price of $2.11 per share (see Note 11).
15.
CONCENTRATIONS OF CREDIT
RISK
Financial
instruments that potentially subject us to a concentration of
credit risk principally consist of cash and cash equivalents,
restricted cash equivalents, and our available for sale securities.
Cash and cash equivalents are primarily held in bank accounts and
overnight investments. At times our cash balances on deposit with
banks may exceed the balance insured by the F.D.I.C. Restricted
cash equivalents are held in accounts with brokerage institutions
and consist of short-term money market funds. Our
available-for-sale securities are held in accounts with brokerage
institutions and consist of mutual funds invested primarily in
short-term municipal securities.
We
maintain our investments with what management believes to be
quality financial institutions and while we limit the amount of
credit exposure to any one institution, we could be subject to
credit risks from concentration of investments in a single fund as
well as credit risks arising from adverse conditions in the
financial markets as a whole.
16.
SUBSEQUENT
EVENTS
In
February and March 2019, we sold an aggregate of $1.3 million in
convertible notes to accredited investors. The notes mature five
years from the date of issuance and are convertible, at the
holders’ option, into shares of our common stock at a fixed
conversion price of $0.25 per share. The notes bear interest at a
stated rate of 8% per annum. Interest is payable quarterly, and we
may elect, subject to certain equity conditions, to pay interest in
cash, shares of our common stock, or a combination
thereof.
On
March 29, 2019, we amended our promissory note payable to SKGF to
provide for a decrease in the interest rate from 8% to 4% per year,
an extension of the maturity date from March 2020 to April 2022,
and a reduction in the monthly payment. In connection with this
amendment, SKGF also waived any prior payment defaults under the
note. As a result of this amendment, approximately $0.65 million of
our obligation to SKGF was reclassified from current to long-term
liabilities as of December 31, 2018.
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item
13.
Other
Expenses of Issuance and Distribution
The
estimated expenses in connection with the sale of the securities
being registered hereby, all of which will be borne by us, are as
follows:
SEC
registration fee
|
$382
|
Legal
fees and expenses
|
10,000
|
Accounting
fees and expenses
|
18,000
|
Miscellaneous
|
1,000
|
Total
|
$29,382
|
Item
14.
Indemnification
of Directors and Officers.
The
laws of the Florida permit the indemnification of directors,
employees, officers and agents of Florida corporations. Our
articles of incorporation and bylaws provide that we shall
indemnify to the fullest extent permitted by Florida law any person
whom we may indemnify under that law.
The
provisions of Florida law that authorize indemnification do not
eliminate the duty of care of a director. In appropriate
circumstances, equitable remedies such as injunctive or other forms
of non-monetary relief will remain available. In addition, each
director will continue to be subject to liability for (a)
violations of criminal laws, unless the director has reasonable
cause to believe that his conduct was lawful or had no reasonable
cause to believe his conduct was unlawful, (b) deriving an improper
personal benefit from a transaction, (c) voting for or assenting to
an unlawful distribution and (d) willful misconduct or conscious
disregard for our best interests in a proceeding by or in our right
to procure a judgment in its favor or in a proceeding by or in the
right of a shareholder. The statute does not affect a director's
responsibilities under any other law, such as the federal
securities laws.
We have
entered into indemnification and reimbursement agreements with each
of our directors.
The
effect of the foregoing is to require us to indemnify our officers
and directors for any claim arising against such persons in their
official capacities if such person acted in good faith and in a
manner that he or she reasonably believed to be in or not contrary
to the best interests of the corporation, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe
his or her conduct was unlawful.
We have
directors and officer’s insurance which includes insurance
for claims against these persons brought under securities
laws.
To the
extent that we indemnify our management for liabilities arising
under securities laws, we have been informed by the SEC that this
indemnification is against public policy and is therefore
unenforceable.
Item
15.
Recent
Sales of Unregistered Securities
The
information contained in the prospectus under the headings
“The Private Placements” is incorporated herein by
reference.
On
September 10, 2018, we consummated the sale of convertible
promissory notes (the “First Notes”) for aggregate
proceeds of $900,000. In connection with the transaction, we
entered into a purchase agreement with accredited investors which
provides for the sale of the First Notes with an aggregate face
value of $900,000. The outstanding principal and interest accrued
on the First Notes are convertible at any time and from time to
time by the holders into shares of our Common Stock at a fixed
conversion price of $0.40 per share. Any unconverted, outstanding
principal amount of the First Notes is payable in cash on September
7, 2023.
On
September 19, 2018, we consummated the sale of a convertible
promissory note (the “Second Note”) to an accredited
investor for aggregate proceeds of $425,000. The Second Note was
issued on substantially the same terms and conditions as the First
Notes except that the Second Note is convertible at any time and
from time to time by the holder at a fixed conversion price of
$0.57 per share and a maturity date of September 18, 2023. The
First Notes and Second Note are collectively referred to herein as
the “Convertible Notes Transactions” or the
“Notes”.
At any
time following the one-year anniversary of the issuance of the
Notes, we may prepay the then outstanding principal amount of the
Notes, along with any accrued interest (the “Prepayment
Amount”), upon at least thirty (30) days written notice to
the holder (“Prepayment Notice”). The holder will have
the right, upon written notice within twenty (20) business days of
receipt of the Prepayment Notice, to convert all or a portion of
the Prepayment Amount into shares of our Common Stock at the fixed
conversion price. Any Prepayment Amount in cash will include a
premium of 25% prior to the two-year anniversary of the Notes
issuance date, 20% prior to the three-year anniversary of the Notes
issuance date, 15% prior to the four-year anniversary of the Notes
issuance date, or 10% thereafter.
Interest
of 8% per annum is payable on the Notes beginning on the earlier of
(i) the effective date of a Registration Statement registering the
shares underlying the Notes or (ii) the one hundred eighty (180)
day anniversary of the issuance dates of the Notes and in quarterly
installments thereafter at our option, subject to certain equity
conditions, in either (i) cash or (ii) shares of Common Stock
(“Repayment Shares”), or (iii) a combination of cash
and Repayment Shares. In an event of default, the interest rate
increases to 12% per annum and the outstanding principal balance of
the Notes plus all accrued interest due may be declared immediately
payable by the holders of a majority of the then outstanding
principal balance of the Notes.
The
number of Repayment Shares is determined by dividing the interest
payment amount by the closing price of our Common Stock on the
trading day prior to the interest payment date, which may be less
than the stated conversion price of the Notes. We may only elect to
issue Repayment Shares if (i) no event of default has occurred or
is occurring, (ii) the holder has not been issued greater than
14.99% of our then outstanding shares, inclusive of the Repayment
Shares being issued, unless expressly waived by the Board, (iii)
the Repayment Shares are registered on an effective Registration
Statement or otherwise subject to an exemption therefrom, and (iv)
our shares are listed or quoted on a market or exchange which
includes the OTCQB, the OTCQX or the “Pink Sheets”
published by the OTC Market Groups.
Under
the terms of the Notes, no holder shall have the right to convert
the Notes to the extent that, after giving effect to such
conversion, the holder would beneficially own in excess of 4.99%
(the “Maximum Percentage”) of the number of shares of
Common Stock outstanding immediately after giving effect to the
conversion. Upon written notice to us, a holder may from time to
time increase or decrease the Maximum Percentage to any other
percentage not in excess of 9.99%.
On July
26, 2018, we entered into a securities purchase agreement with
Aspire Capital whereby we agreed to sell to Aspire Capital up to
$2.0 million of shares of our Common Stock (or pre-funded warrants
in lieu thereof) and warrants, in two tranches. On July 26, 2018,
we sold to Aspire Capital (i) a pre-funded warrant to purchase up
to 2,500,000 shares of our Common Stock with an exercise price of
$.01 per share (“Pre-Funded Warrant”) and (ii) a
warrant to purchase up to 2,500,000 shares of our Common Stock with
an exercise price of $.74 per share (a “Warrant”), for
a purchase price of $975,000. In addition, on the day following the
effectiveness of the registration statement described below, we
sold to Aspire Capital (i) a second Pre-Funded Warrant to purchase
up to 2,500,000 shares of our Common Stock with an exercise price
of $0.01 per share and (ii) a Warrant to purchase an additional
2,500,000 shares of Common Stock at an exercise price of $0.78 per
share, for an aggregate purchase price of $975,000. The shares
underlying this transaction were registered under a Form S-1
registration statement that was declared effective on September 10,
2018 (File No. 333-226737).
On
March 26, 2018, three of our directors purchased an aggregate of
200,000 shares of our Common Stock in an unregistered sale of
equity securities at a purchase price of $0.83 per share, which
represented the closing bid price of our Common Stock on the
purchase date.
On
October 17, 2017, we entered into a common stock purchase agreement
(the “Equity Line Agreement”) with Aspire Capital under
which Aspire Capital committed to purchase up to an aggregate of
$20 million in shares of our Common Stock over the 30-month
term of the Equity Line Agreement. In consideration for entering
into the Equity Line Agreement, we issued to Aspire Capital 287,500
shares of our Common Stock as a commitment fee. As of August 8,
2018, we have sold 3,712,500 shares of Common Stock to Aspire
Capital under the Equity Line Agreement for an aggregate purchase
price of approximately $3.1 million. We filed a registration
statement to register the sale of up to 4 million shares of
our Common Stock by Aspire Capital that have been issued under the
Equity Line Agreement. The registration statement was declared
effective November 27, 2017 (File No.
333-221250).
Under
the Equity Line Agreement, on any trading day selected by us, we
have the right, in our sole discretion, to present Aspire Capital
with a purchase notice, directing Aspire Capital to purchase up to
150,000 shares of our Common Stock, provided that the aggregate
purchase amount for such shares does not exceed $0.5 million
and subject to the maximum aggregate amount of $20 million.
The per share purchase price for each purchase notice is equal to
the lesser of (i) the lowest sale price of our Common Stock on the
purchase date; or (ii) the arithmetic average of the three lowest
closing sale prices for our Common Stock during the ten consecutive
trading days ending on the trading day immediately preceding the
purchase date.
In
addition, on any date on which we submit a purchase notice to
Aspire Capital, we also have the right, in our sole discretion, to
present Aspire Capital with a volume-weighted average price
(“VWAP”) purchase notice directing Aspire Capital to
purchase an amount of stock equal to up to 30% of the aggregate
shares of our Common Stock traded on its principal market on the
next trading day, or such lesser amount as we may determine. The
purchase price per share pursuant to the VWAP purchase notice
is generally 97% of the
volume-weighted average price for our Common Stock traded on its
principal market on the VWAP purchase date, subject to terms and
limitations of the agreement.
The
issuance of shares of Common Stock that may be issued from time to
time to Aspire Capital under the Equity Line Agreement is exempt
from registration under the Securities Act, pursuant to the
exemption for transactions by an issuer not involving any public
offering under Section 4(a)(2) of the Securities Act.
On
February 21, 2017, we entered into a subscription agreement
providing for the sale of 80,510 shares of our Common Stock at a
price of $2.11 per share, to one of our directors. On February 24,
2016, we closed the sale contemplated by the Subscription
agreement. The Common Stock was offered and sold to an accredited
investor on a private placement basis under Section 4(a)(2) of the
Securities Act, as amended.
Item
16.
Exhibits
and Financial Statements.
(a)
A list of the
exhibits required by Item 601 of Regulation S-K to be filed as part
of this registration statement is set forth in the Exhibit Index on
page II-5.
(b)
Financial statement
schedules:
None.
(a)
The undersigned
registrant hereby undertakes:
(1)
To file, during any
period in which offers or sales are being made, a post-effective
amendment to this registration statement:
(i)
To include any
prospectus required by Section 10(a)(3) of the Securities Act of
1933;
(ii)
To reflect in the
prospectus any facts or events arising after the effective date of
the registration statement (or the most recent post-effective
amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement. Notwithstanding the foregoing, any increase
or decrease in volume of securities offered (if the total dollar
value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b) if, in
the aggregate, the changes in volume and price represent no more
than 20 percent change in the maximum aggregate offering price set
forth in the “Calculation of Registration Fee” table in
the effective registration statement;
(iii)
To include any
material information with respect to the plan of distribution not
previously disclosed in the registration statement or any material
change to such information in the registration
statement;
Provided, however, that paragraphs (a)(1)(i),
(ii), and (iii) do not apply if the registration statement is on
Form S-1, Form S-3, Form SF-3 or Form F-3 and the information
required to be included in a post-effective amendment by those
paragraphs is contained in reports filed with or furnished to the
Commission by the registrant pursuant to section 13 or section
15(d) of the Securities Exchange Act of 1934 that are incorporated
by reference in the registration statement, or, as to a
registration statement on Form S-3, Form SF-3 or Form F-3, is
contained in a form of prospectus filed pursuant to 424(b) of this
chapter that is part of the registration statement.
(2)
That, for the
purpose of determining any liability under the Securities Act of
1933, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
(3)
To remove from
registration by means of a post-effective amendment any of the
securities being registered which remain unsold at the termination
of the offering.
(5)
That, for the
purpose of determining liability under the Securities Act of 1933
to any purchaser, each prospectus filed pursuant to Rule 424(b) as
part of a registration statement relating to an offering, other
than registration statements relying on Rule 430B or other than
prospectuses filed in reliance on Rule 430A, shall be deemed to be
part of and included in the registration statement as of the date
it is first used after effectiveness. Provided, however, that no
statement made in a registration statement or prospectus that is
part of the registration statement or made in a document
incorporated or deemed incorporated by reference into the
registration statement or prospectus that is part of the
registration statement will, as to a purchaser with a time of
contract of sale prior to such first use, supersede or modify any
statement that was made in the registration statement or prospectus
that was part of the registration statement or made in any such
document immediately prior to such date of first use.
(b)
The undersigned
registrant hereby undertakes that, for purposes of determining any
liability under the Securities Act of 1933, each filing of the
registrant’s annual report pursuant to Section 13(a) or
Section 15(d) of the Securities Exchange Act of 1934 (and, where
applicable, each filing of an employee benefit plan’s annual
report pursuant to Section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in the registration
statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of
such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(h)
Insofar as
indemnification for liabilities arising under the Securities Act of
1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or
otherwise, the registrant has been advised that in the opinion of
the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act and is, therefore,
unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant
of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in
the Act and will be governed by the final adjudication of such
issue.
EXHIBIT INDEX
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ExhibitNumber
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Description
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3.1
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3.2
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3.3
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3.4
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3.5
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3.6
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3.7
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4.1
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4.2
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4.3
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4.4
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5.1*
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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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10.14
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10.15
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10.16
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10.17
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10.18
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10.19
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10.20
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10.21
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10.22
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10.23
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10.24
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10.25
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10.26
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10.27
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10.28
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10.29
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10.30
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10.31
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10.32
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10.33
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10.34
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10.35
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10.36
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10.37
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10.38
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10.39
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10.40
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10.41
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10.45
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10.46
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10.47
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10.48
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10.49
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10.50
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10.51
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10.52
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10.53
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10.54
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10.55
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10.56
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21.1
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23.1*
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23.2*
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23.3*
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24.1*
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* Filed
herewith
**
Management contract or compensatory plan or
arrangement
SIGNATURES
Pursuant
to the requirements of the Securities Act of 1933, the registrant
has duly caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City
of Jacksonville, State of Florida on this 21st day of August,
2019.
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PARKERVISION,
INC.
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By:
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/s/Jeffrey
Parker
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Jeffrey
Parker, Chief Executive Officer and Chairman of the
Board
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KNOW
ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Jeffrey L. Parker and Cynthia L.
Poehlman, and each of them, with full power to act without the
other, such person’s true and lawful attorneys-in-fact and
agents, with full power of substitution and re-substitution, for
him and in his name, place and stead, in any and all capacities, to
sign this registration statement, any and all amendments thereto
(including post-effective amendments), and any amendments thereto
and to file the same, with exhibits and schedules thereto, and
other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and
perform each and every act and thing necessary or desirable to be
done in and about the premises, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or any of
them, or their or his substitute or substitutes, may lawfully do or
cause to be done by virtue hereof.
Pursuant
to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in
the capacities and on the dates indicated.
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Signature
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Title
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Date
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By: /s/
Jeffrey L. Parker
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Chief
Executive Officer and Chairman of the
Board (Principal Executive
Officer)
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August
21, 2019
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Jeffrey
L. Parker
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By: /s/
Cynthia L. Poehlman
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Chief
Financial Officer (Principal Financial Officer
and Principal Accounting
Officer)
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August
21, 2019
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Cynthia
L. Poehlman
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By: /s/
Frank N. Newman
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Director
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August
21, 2019
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Frank N.
Newman
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By: /s/
Paul A. Rosenbaum
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Director
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August
21, 2019
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Paul A.
Rosenbaum
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By: /s/
Robert G. Sterne
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Director
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August
21, 2019
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Robert
G. Sterne
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