Form 424B3 PARKERVISION INC

April 1, 2021 10:16 AM EDT

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Filed pursuant to Rule 424(b)(3)
Registration No. 333-237762
 
PROSPECTUS SUPPLEMENT No. 15
(to Prospectus dated April 28, 2020)
 
PARKERVISION, INC.
 
16,809,295 Shares of Common Stock
 
This Prospectus Supplement relates to the prospectus dated April 28, 2020, as amended and supplemented from time to time (the “Prospectus”), which permits the resale by the selling stockholders listed in the Prospectus of up to 16,809,295 shares of our common stock, par value $0.01 per share (“Common Stock”) consisting of (i) up to 4,961,538 shares of Common Stock issuable upon conversion of, and for the payment of interest from time to time at our option, for a convertible promissory note dated September 13, 2019 which has a fixed conversion price of $0.10 per share and convertible promissory notes dated January 8, 2020 which have a fixed conversion price of $0.13 per share (the “Notes”), (ii) an aggregate of 3,907,331 shares of Common Stock issued pursuant to securities purchase agreements dated January 9, 2020, January 15, 2020, March 5, 2020 and March 19, 2020, (iii) an aggregate of 2,740,426 shares of Common Stock issued as payment for services and repayment of short-term loans and other accounts payable, including interest, (iv) up to 5,000,000 shares of Common Stock issuable upon exercise of a five-year warrant with an exercise price of $0.74 per share, subject to adjustment and issued pursuant to a warrant agreement with Aspire Capital Fund LLC (“Aspire”) and (v) up to 200,000 shares of Common stock issuable upon exercise of a three-year warrant with an exercise price of $1.00 per share, subject to adjustment and issued pursuant to a warrant agreement with Tailwinds Research Group LLC (“Tailwinds”).
 
We will not receive proceeds from the sale of the shares of Common Stock by the selling stockholders. To the extent the Aspire and Tailwinds warrants are exercised for cash, we will receive up to an aggregate of $3,900,000 in gross proceeds. We expect to use proceeds received from the exercise of the Aspire and Tailwinds warrants, if any, for general working capital and corporate purposes.
 
This Prospectus Supplement is being filed to update and supplement the information previously included in the Prospectus with the information contained in our Annual Report on Form 10-K filed with the Securities and Exchange Commission (the “SEC”) on March 31, 2021. Accordingly, we have attached the 10-K to this prospectus supplement. You should read this prospectus supplement together with the prospectus, which is to be delivered with this prospectus supplement.
 
Any statement contained in the Prospectus shall be deemed to be modified or superseded to the extent that information in this Prospectus Supplement modifies or supersedes such statement. Any statement that is modified or superseded shall not be deemed to constitute a part of the Prospectus except as modified or superseded by this Prospectus Supplement.
 
This Prospectus Supplement should be read in conjunction with, and may not be delivered or utilized without, the Prospectus.
 
Our Common Stock is listed on the OTCQB Venture Capital Market under the ticker symbol “PRKR.” 
 
Investing in our securities involves a high degree of risk. See “Risk Factors” beginning on page 6 of this prospectus for a discussion of information that should be considered in connection with an investment in our securities.
 
Neither the SEC nor any such authority has approved or disapproved these securities or determined whether this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
 
 
The date of this Prospectus Supplement is April 1, 2021.
 
 
 
  UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-K

(Mark One)

(X)   ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2020

or

(  )   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES ACT OF 1934
For the transition period from ________to__________

Commission file number 000-22904

PARKERVISION, INC.
(Exact Name of Registrant as Specified in its Charter)


 
 
Florida
 
59-2971472
(State of Incorporation)
 
(I.R.S. Employer ID No.)

4446-1A Hendricks Avenue,  Suite 354,  
Jacksonville,  Florida 32207
(Address of Principal Executive Offices)
Registrant’s telephone number, including area code: (904)  732-6100

Securities registered pursuant to Section 12(b) of the Act:

 
 
Title of Each Class
Trading
Symbol(s)
Name of Each Exchange on Which Registered
Common Stock, $.01 par value
PRKR
OTCQB
Common Stock Rights
 
OTCQB

Securities registered pursuant to Section 12(g) of the Act:
None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  Yes (  ) No (X)

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Securities Exchange Act.  Yes (  ) No (X)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes (X) No (  )

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes (X) No (  )

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


 
Large accelerated filer (  )
Accelerated filer (  )
Non-accelerated filer (X) 
Smaller reporting company (X)

Emerging growth company (  )

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.   (  )

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit reports.   (   )

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).   Yes (  ) No (X)

As of June 30,  2020, the aggregate market value of the registrant’s common stock, $.01 par value, held by non-affiliates of the registrant was approximately $23,474,499 (based upon $0.49 share last sale price on that date, as reported by OTCQB).

As of March 30, 2021,  69,886,849 shares of the Issuer's Common Stock were outstanding.
 
 
 
 
 
 
TABLE OF CONTENTS 


 
 
 
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INTR ODUCTORY NOTE

Unless the context otherwise requires, in this Annual Report on Form 10-K (“Annual Report”), “we”, “us”, “our” and the “Company” mean ParkerVision, Inc. and its wholly-owned German subsidiary, ParkerVision GmbH.

Forward-Looking Statements

We believe that it is important to communicate our future expectations to our shareholders and to the public.  This Annual Report contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including, without limitation, statements about our future plans, objectives, and expectations under the headings “Item 1. Business” and “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.”  Forward-looking statements include any statement that does not directly relate to any historical or current fact.  When used in this Annual Report and in future filings by the Company with the Securities and Exchange Commission (“SEC”), the words or phrases “will likely result”, “management expects”, “we expect”, “will continue”, “is anticipated”, “estimated” or similar expressions are intended to identify such “forward-looking statements.”  Readers are cautioned not to place undue reliance on such forward-looking statements, each of which speaks only as of the date made.  Such statements are subject to certain risks and uncertainties that could cause actual results to differ materially from historical results and those presently anticipated or projected, including the risks and uncertainties set forth in this Annual Report under the heading “Item 1A. Risk Factors” and in our other periodic reports.  Examples of such risks and uncertainties include general economic and business conditions, the outcome of litigation, unexpected changes in technologies and technological advances, reliance on our intellectual property, and the ability to obtain adequate financing in the future. We have no obligation to publicly release the results of any revisions that may be made to any forward-looking statements to reflect anticipated events or circumstances occurring after the date of such statements.

PA RT I

Item 1.  B usiness.

We are in the business of innovating fundamental wireless technologies and products.  We have designed and developed proprietary radio frequency (“RF”) technologies and integrated circuits for use in wireless communication products.

We have expended significant financial and other resources to research and develop our RF technologies and to obtain patent protection for those technologies in the United States of America (“U.S.”) and certain foreign jurisdictions.  We believe certain patents protecting our proprietary technologies have been broadly infringed by others and therefore the primary focus of our business plan is the enforcement of our intellectual property rights through patent infringement litigation and licensing efforts.  We currently have patent enforcement actions ongoing in various U.S. district courts against mobile handset providers and providers of smart televisions and other WiFi products and, in certain cases, their chip suppliers for the infringement of several of our RF patents.  We have made significant investments in developing and protecting our technologies, the returns on which are dependent upon the generation of future revenues for realization.

In 2018, we restructured our operations to reduce operating expenses in light of our limited capital resources.  As part of that restructuring, we made significant reductions in our investment in the development and marketing of a consumer distributed WiFi product line marketed under the brand name Milo®.  In early 2019, we ceased substantially all ongoing research and development efforts and, where
 
 
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applicable, repurposed resources to support our patent enforcement and product sales and support efforts. We ceased sales of our Milo products in the fourth quarter of 2019 and are currently focused exclusively on our patent enforcement litigation and licensing efforts.

We spent much of 2020 supporting our two patent infringement cases against Qualcomm and others that were scheduled for jury trials in Florida in 2020.  As a result of the COVID-19 pandemic, in 2020, one of those trials was rescheduled for mid-year 2021 and the second was stayed pending the outcome of the first case.  In addition, in 2020, we filed a number of cases in Texas against alleged infringers of our patented technologies.  See “Legal Proceedings” in Note 12 to our consolidated financial statements included in Item 8 for a detailed description of our various patent enforcement actions. 

A significant portion of our litigation costs have been funded under a secured contingent payment arrangement with Brickell Key Investments, LP (“Brickell”), contingent arrangements with legal counsel, and various debt and equity financings.  See “Liquidity and Capital Resources” included in Item 7 for a full discussion of our litigation funding arrangements and our equity and debt financings. 

Products

We produced and sold consumer WiFi products, under the tradename Milo, from 2017 to 2019.  These products offered a cost-effective networking system to enhance WiFi connectivity by effectively distributing the WiFi signal from existing routers and modems throughout a broader coverage area.  We marketed these products primarily to consumers through Amazon.com and other online outlets, including our own direct-to-consumer online retail site.  We ceased sales of these WiFi products in 2019. 

RF Technologies

Our RF technologies enable highly accurate transmission and reception of RF carriers at low power, thereby enabling extended battery life, and certain size, cost, performance, and packaging advantages. 
We believe the most significant hurdle to the licensing and/or sale of our technologies and related products is the widespread use of certain of our technologies in infringing products produced by companies with significantly greater financial, technical, sales, and marketing resources.  We believe we can 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 business plan.  We have a program to file applications for and obtain patents, copyrights, and trademarks in the U.S. and in selected foreign countries where we believe filing for such protection is appropriate to establish and maintain our proprietary rights in our technology and products.  As of December 31, 2020, we had approximately 86 active U.S. and foreign patents related to our RF technologies.  In addition, we have a number of recently expired patents that we believe continue to have significant economic value as a result of our ability to assert past damages in our patent enforcement actions.  We estimate the economic lives of our patents to be the shorter of fifteen years from issuance or twenty years from the earliest application date.  Our current portfolio of issued patents have expirations ranging from 2021 to 2036. 

 
 
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Employees

As of December 31, 2020, we had seven full-time and two part-time employees.  We also outsource certain specialty services, such as information technology, and utilize contract staff and third-party consultants from time to time to supplement our workforce.  Our employees are not represented by any collective bargaining agreements and we consider our employee relations to be satisfactory.

We have taken measures to protect our workforce in response to the COVID-19 pandemic, including optional remote worksites for all of our employees beginning in April 2020.  Our management, with the oversight of our board of directors, monitors the hiring, retention and management of our employees.

Available Information and Access to Reports

We file annual reports on Forms 10-K, quarterly reports on Forms 10-Q, proxy statements and other reports, including any amendments thereto, electronically with the SEC.  The SEC maintains an Internet site (http://www.sec.gov) where these reports may be obtained at no charge.  We also make copies of these reports available, free of charge through our website (http://www.parkervision.com) via the link “SEC filings” as soon as practicable after filing or furnishing such materials with the SEC. 

Corporate Website

We announce investor information, including news and commentary about our business, financial performance and related matters, SEC filings, notices of investor events, and our press and earnings releases, in the investor relations section of our website (http://ir.parkervision.com). Additionally, if applicable, we webcast our earnings calls and certain events we participate in or host with members of the investment community in the investor relations section of our website.  Investors and others can receive notifications of new information posted in the investor relations section in real time by signing up for email alerts and/or RSS feeds.  Further corporate governance information, including our governance guidelines, Board committee charters, and code of conduct, is also available in the investor relations section of our website under the heading “Corporate Governance.”  The content of our website is not incorporated by reference into this Annual Report or in any other report or document we file with the SEC, and any references to our website are intended to be inactive textual references only.
 
Item 1A.  Ris k Factors.

In addition to other risks and uncertainties described in this Annual Report, the following risk factors should be carefully considered in evaluating our business because such factors may have a significant impact on our business, operating results, liquidity and financial condition.  As a result of the risk factors set forth below, actual results could differ materially from those projected in any forward-looking statements.

Financial and Operating Risks

Our financial condition raises substantial doubt as to our ability to continue as a going concern.

We have had significant losses and negative cash flows in every year since inception, and continue to have an accumulated deficit which, at December 31, 2020, was approximately $421.4 million. Our net losses for the years ended December 31, 2020 and 2019 were approximately $19.6 million and $9.5 million, respectively.  Our independent registered public accounting firm has included in their audit opinion on our consolidated financial statements as of and for the year ended December 31, 2020, a statement with respect to substantial doubt about our ability to continue as a going concern.  Note 2 to our
 
 
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consolidated financial statements included in Item 8 includes a discussion regarding our liquidity and our ability to continue as a going concern. Our consolidated financial statements have been prepared assuming we will continue to operate as a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.  If we become unable to continue as a going concern, we may have to liquidate our assets and the values we receive for our assets in liquidation or dissolution could be significantly lower than the values reflected in our consolidated financial statements.  The substantial doubt as to our ability to continue as a going concern may adversely affect our ability to negotiate reasonable terms with our vendors and may adversely affect our ability to raise additional capital in the future.

We have had a history of losses which may ultimately compromise our ability to implement our business plan and continue in operation.

To date, our technologies and products have not produced revenues sufficient to cover our operating costs. We will continue to make expenditures on patent protection and enforcement and general operations in order to continue our current patent enforcement and licensing efforts. Those efforts may not produce a successful financial outcome in 2021, or at all.  Without a successful financial outcome from one or more of our patent enforcement and licensing efforts, we will not achieve profitability.  Furthermore, our current capital resources may not be sufficient to sustain our operations through 2021.  If we are not able to generate sufficient revenues or obtain sufficient capital resources, we may not be able to implement our business plan or meet our current obligations due within the twelve months after the issuance date of our consolidated financial statements and investors will suffer a loss in their investment. This may also result in a change in our business strategies.

We will need to raise substantial additional capital in the future to fund our operations.  Failure to raise such additional capital may prevent us from implementing our business plan as currently formulated.

Because we have had net losses and, to date, have not generated positive cash flow from operations, we have funded our operating losses primarily from the sale of debt and equity securities, including our secured contingent debt obligation.  Our capital resources include cash and cash equivalents of $1.6 million at December 31, 2020 and proceeds of approximately $5.6 million received during the first quarter of 2021 from various debt and equity transactions, including the exercise of options and warrants.  Although we implemented significant cost reduction measures in 2019 and 2020, our business plan will continue to require expenditures for patent protection and enforcement and general operations. For the years ended December 31, 2020 and 2019, we used $4.8 million and $3.4 million, respectively in cash for operations which was funded primarily through the sale of convertible debt and equity securities. In addition, we used $3.0 million of the proceeds received during the first quarter of 2021 to repay outstanding obligations to one of our litigation firms.  Our current capital resources may not be sufficient to meet our working capital needs for the twelve months after the issuance of our consolidated financial statements and we may require additional capital to fund our operations. Additional capital may be in the form of debt securities, the sale of equity securities, including common or preferred stock, additional litigation funding, or a combination thereof. Failure to raise additional capital may have a material adverse impact on our ability to achieve our business objectives.

Raising additional capital by issuing debt securities or additional equity securities may result in dilution and/or impose covenants or restrictions that create operational limitations or other obligations.

We may require additional capital to fund our operations and meet our current obligations due within the twelve months after the issuance date of our consolidated financial statements.  Financing, if any, may be
 
 
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in the form of debt or sales of equity securities, including common or preferred stock.  Debt instruments or the sale of preferred stock may result in the imposition of operational limitations and other covenants and payment obligations, any of which may be burdensome to us and may have a material adverse impact on our ability to implement our business plan as currently formulated.  The sale of equity securities, including common or preferred stock, may result in dilution to the current stockholders’ ownership and may be limited by the number of shares we have authorized and available for issuance.

We may be obligated to repay outstanding notes at a premium upon the occurrence of an event of default.

We have $1.0 million in secured and unsecured notes payable and $3.9 million in outstanding principal under convertible notes payable at December 31, 2020.  If we fail to comply with the various covenants set forth in each of the notes, including failure to pay principal or interest when due or, under certain notes, consummating a change in control, we could be in default thereunder. Upon an event of default under each of the notes, the interest rate of the notes will increase to 12% per annum and the outstanding principal balance of the notes plus all accrued unpaid interest may be declared immediately payable by the holders. We may not have sufficient available funds to repay the notes upon an event of default, and we cannot provide assurances that we will be able to obtain other financing at terms acceptable to us, or at all. 

Our ability to utilize our tax benefits could be substantially limited if we fail to generate sufficient income or if we experience an “ownership change.”

We have cumulative net operating loss carryforwards (“NOLs”) totaling approximately $323.2 million at December 31, 2020, of which $294.1 million is subject to expiration in varying amounts from 2021 to 2037.  Our ability to fully recognize the benefits from those NOLs is dependent upon our ability to generate sufficient income prior to their expiration.  In addition, our NOL carryforwards may be limited if we experience an ownership change as defined by Section 382 of the Internal Revenue Code (“Section 382”).  In general, an ownership change under Section 382 occurs if 5% shareholders increase their collective ownership of the aggregate amount of our outstanding shares by more than 50 percentage points over a relevant lookback period. We have sold a significant number of equity securities over the relevant lookback period which increases the risk of triggering an ownership change under Section 382 from the  future sale of additional equity securities.  An ownership change under Section 382 will significantly limit our ability to utilize our tax benefits. 

Our litigation funding arrangements may impair our ability to obtain future financing and/or generate sufficient cash flows to support our future operations.

We have funded much of our cost of litigation through contingent financing arrangements with Brickell and others and contingent fee arrangements with legal counsel.  The repayment obligation to Brickell is secured by the majority of our assets until such time that we have repaid a specified minimum return.  Furthermore, our contingent arrangements will result in reductions in the amount of net proceeds retained by us from litigation, licensing and other patent-related activities.  The contingent fees payable to legal counsel, Brickell and others will consume all of our initial future proceeds up to specified limits and could exceed half of our proceeds thereafter depending on size and timing of proceeds, among other factors. The long-term continuation of our business plan is dependent upon our ability to secure sufficient financing to support our business, and our ability to generate revenues and/or patent related proceeds sufficient to offset expenses and meet our contingent payment obligations.  Failure to generate revenue or other patent-related proceeds sufficient to repay our contingent obligations may impede our ability to obtain additional financing which will have a material adverse effect on our ability to achieve our long-term business objectives.
 
 
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Our litigation can be time-consuming, costly and we cannot anticipate the results.

Since 2011, we have spent a significant amount of our financial and management resources to pursue patent infringement litigation against third parties. We believe this litigation, and other litigation matters that we may in the future determine to pursue, will continue to consume management and financial resources for long periods of time. There can be no assurance that our current or future litigation matters will ultimately result in a favorable outcome for us or that our financial resources will not be exhausted before achieving a favorable outcome.  In addition, even if we obtain favorable interim rulings or verdicts in particular litigation matters, they may not be predictive of the ultimate resolution of the matter. Unfavorable outcomes could result in exhaustion of our financial resources and could hinder our ability to pursue licensing and/or product opportunities for our technologies in the future.  Failure to achieve favorable outcomes from one or more of our patent enforcement actions will have a material adverse impact on our financial condition, results of operations, cash flows, and business prospects.

If our patents and intellectual property rights do not provide us with the anticipated market protections, our competitive position, business, and prospects will be impaired.

We rely on our intellectual property rights, including patents and patent applications, to provide competitive advantage and protect us from theft of our intellectual property. We believe that our patents are for entirely new technologies and that our patents are valid, enforceable and valuable. However, third parties have made claims of invalidity with respect to certain of our patents and other similar claims may be brought in the future. For example, the Federal Patent Court in Munich recently invalidated one of our patents that was the subject of infringement cases against LG and Apple in Germany following a nullity claim filed by Qualcomm.  If our patents are shown not to be as broad as currently believed, or are otherwise challenged such that some or all of the protection is lost, we will suffer adverse effects from the loss of competitive advantage and our ability to offer unique products and technologies. As a result, there would be an adverse impact on our financial condition and business prospects. Furthermore, defending against challenges to our patents may give rise to material costs for defense and divert resources away from our other activities.

Our business, results of operations, and financial condition may be impacted by the recent coronavirus (COVID-19) outbreak.

The global spread of COVID-19 has created significant volatility and uncertainty in financial markets.  If such volatility and uncertainty persist, we may be unable to raise additional capital on terms that are acceptable to us, or at all.  Additionally, in response to the pandemic, governments and the private sector have taken a number of drastic measures to contain the spread of COVID-19.  While our employees currently have the ability and are encouraged to work remotely, such measures may have a substantial impact on employee attendance or productivity, which, along with the possibility of employees’ illness, may adversely affect our operations. 

In addition, COVID-19 has negatively impacted the timing of our current patent infringement actions as a result of office closures, travel restrictions and court closures.  For example, our patent infringement trial in Orlando, Florida has been delayed twice due to the impact of COVID-19.  It is possible that further delays in our cases could occur.

Although COVID-19 is currently not material to our results of operations, there is significant uncertainty relating to the potential impact of COVID-19 on our business.  The extent to which COVID-19 impacts our ongoing patent enforcement actions and our ability to obtain financing, as well as our results of operations and financial condition, generally, will depend on future developments which are highly
 
 
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uncertain and cannot be predicted, including new information which may emerge concerning the severity of COVID-19 and the actions taken by governments and private businesses to contain COVID-19 or treat its impact, among others.  If the disruptions posed by COVID-19 continue for an extensive period of time, our business, results of operations, and financial condition may be materially adversely affected.    

We are subject to outside influences beyond our control, including new legislation that could adversely affect our licensing and enforcement activities and have an adverse impact on the execution of our business plan.

Our licensing and enforcement activities are subject to numerous risks from outside influences, including new legislation, regulations and rules related to obtaining or enforcing patents. For instance, the U.S. has enacted sweeping changes to the U.S. patent system including changes that transition the U.S. from a “first-to-invent” to a “first-to-file” system and that alter the processes for challenging issued patents. To the extent that we are unable to secure patent protection for our future technologies and/or our current patents are challenged such that some or all of our protection is lost, we will suffer adverse effects to our ability to offer unique products and technologies. As a result, there would be an adverse impact on our financial position, results of operations and cash flows and our ability to execute our business plan.

Our industry is subject to rapid technological changes which if we are unable to match or surpass, will result in a loss of competitive advantage and market opportunity.

Because of the rapid technological development that regularly occurs in the wireless technology industry, along with shifting user needs and the introduction of competing products and services, we have historically devoted substantial resources to developing and improving our technology and introducing new product offerings.  As a result of our limited financial resources, we have ceased our research and development activities which could result in a loss of future market opportunity which could adversely affect our future revenue potential.

We are highly dependent on Mr. Jeffrey Parker as our chief executive officer.  If his services were lost, it would have an adverse impact on the execution of our business plan. 

Because of Mr. Parker’s leadership position in the company, the relationships he has garnered in both the industry in which we operate and the investment community and the key role he plays in our patent litigation strategies, the loss of his services might be seen as an impediment to the execution of our business plan.  If Mr. Parker was no longer available to the company, investors might experience an adverse impact on their investment.  We maintain $5 million in key-employee life insurance for our benefit for Mr. Parker.

If we are unable to 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 retain these key executives and other specialized employees would have an adverse impact on the technical support activities and the financial reporting and regulatory compliance activities that our business requires.  These activities are instrumental to the successful execution of our business plan.

 
 
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Any disruptions to our information technology systems or breaches of our network security could interrupt our operations, compromise our reputation, and expose us to litigation, government enforcement actions, and costly response measures and could have a material adverse effect on our business, financial condition and results of operations.

We rely on information technology systems, including third-party hosted servers and cloud-based servers, to keep business, financial, and corporate records, communicate internally and externally, and operate other critical functions. If any of our internal systems or the systems of our third-party providers are compromised due to computer virus, unauthorized access, malware, and the like, then sensitive documents could be exposed or deleted, and our ability to conduct business could be impaired. Cyber incidents can result from deliberate attacks or unintentional events. These incidents can include, but are not limited to, unauthorized access to our systems, computer viruses or other malicious code, denial of service attacks, malware, ransomware, phishing, SQL injection attacks, human error, or other events that result in security breaches or give rise to the manipulation or loss of sensitive information or assets. Cyber incidents can be caused by various persons or groups, including disgruntled employees and vendors, activists, organized crime groups, and state-sponsored and individual hackers. Cyber incidents can also be caused or aggravated by natural events, such as earthquakes, floods, fires, power loss, and telecommunications failures. The risk of cybersecurity breach has generally increased as the number, intensity, and sophistication of attempted attacks from around the world has increased. While we have cyber security procedures in place, given the evolving nature of these threats, there can be no assurance that we will not suffer material losses in the future due to cyber-attacks.

To date, we have not experienced any material losses relating to cyber-attacks, computer viruses or other systems failures.  Although we have taken steps to protect the security of data maintained in our information systems, it is possible that our security measures will not be able to prevent the systems’ improper functioning or the improper disclosure of personally identifiable information, such as in the event of cyber-attacks.  In addition to operational and business consequences, if our cybersecurity is breached, we could be held liable to our customers or other parties in regulatory or other actions, and we may be exposed to reputation damages and loss of trust and business.  This could result in costly investigations and litigation, civil or criminal penalties, fines and negative publicity. 

Risks Relating to our Common Stock

Our outstanding options and warrants may affect the market price and liquidity of the common stock.

At December 31, 2020, we had 58.6 million shares of common stock outstanding and had outstanding options and warrants for the purchase of up to 25.1 million additional shares of common stock, of which approximately 22.3 million were exercisable as of December 31, 2020.  In addition, as described more fully below, holders of convertible notes may elect to receive a substantial number of shares of common stock upon conversion of the notes and we may elect to pay accrued interest on the notes in shares of our common stock.  All of the shares of common stock underlying these securities are or will be registered for sale to the holder or for public resale by the holder.  The amount of common stock reserved for issuance may have an adverse impact on our ability to raise capital and may affect the price and liquidity of our common stock in the public market. In addition, the issuance of these shares of common stock will have a dilutive effect on current stockholders’ ownership.

 
 
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The conversion of outstanding convertible notes into shares of common stock, and the issuance of common stock by us as payment of accrued interest upon the convertible notes, could materially dilute our current stockholders.

We have an aggregate principal amount of $3.9 million in convertible notes outstanding at December 31, 2020. The notes are convertible into shares of our common stock at fixed conversion prices, which may be less than the market price of our common stock at the time of conversion. If the entire principal were converted into shares of common stock, we would be required to issue an aggregate of up to 23.6 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.  To date, we have issued approximately 2.5 million shares of common stock as in-kind interest payments on our convertible notes.  We currently do not believe that we will have the financial ability to make payments on the notes in cash when due. Accordingly, we currently intend to make such payments in shares of our common stock to the greatest extent possible. Such interest payments could further dilute our current stockholders.

The price of our common stock may be subject to substantial volatility.

The trading price of our common stock has been and may continue to be volatile. Between January 1, 2019 and March 19, 2021, the reported high and low sales prices for our common stock ranged between $0.06 and $1.91 per share. The price of our common stock may continue to be volatile as a result of a number of factors, some of which are beyond our control. These factors include, but are not limited to, developments in outstanding litigation, our performance and prospects, general conditions of the markets in which we compete, and economic and financial conditions, and the impact of COVID-19 on global financial markets. Such volatility could materially and adversely affect the market price of our common stock in future periods.

Our common stock is quoted on OTCQB, an over-the-counter market. There can be no assurance that our common stock will continue to trade on the OTCQB or on another over-the-counter market or securities exchange.

Our common stock began trading on the OTCQB, an over-the-counter market, in August 2018 immediately following delisting from Nasdaq, under the symbol “PRKR”. The over-the-counter market is a significantly more limited market than a nationally-recognized securities exchange such as Nasdaq, and the quotation of our common stock on the over-the-counter market has resulted in a less liquid market available for existing and potential stockholders to trade shares of our common stock. Securities traded in the over-the-counter market generally have less liquidity due to factors such as the reduced number of investors that will consider investing in the securities, the reduced number of market makers in the securities, and the reduced number of securities analysts that follow such securities. As a result, holders of shares of our common stock may find it difficult to resell their shares at prices quoted in the market or at all. We are also subject to additional compliance requirements under applicable state laws relating to the issuance of our securities. This could have a long-term adverse effect on our ability to raise capital, which ultimately could adversely affect the market price of our common stock.  We cannot provide any assurances as to if or when we will be in a position to relist our common stock on a nationally-recognized securities exchange.

 
 
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Our common stock is classified as a “penny stock” under SEC rules, which means broker-dealers who make a market in our stock will be subject to additional compliance requirements.

Our common stock is deemed to be a "penny stock" as defined in the Securities Exchange Act of 1934 (the “Exchange Act”).  Penny stocks are stocks (i) with a price of less than five dollars per share; (ii) that are not traded on a recognized national exchange; (iii) whose prices are not quoted on an automated quotation system sponsored by a recognized national securities association; or (iv) whose issuer has net tangible assets less than $2,000,000 (if the issuer has been in continuous operation for at least three years); or $5,000,000 (if continuous operations for less than three years); or with average revenues of less than $6,000,000 for the last three years.  The Exchange Act requires broker-dealers dealing in penny stocks to provide potential investors with a document disclosing the risks of penny stocks and to obtain a manually signed and dated written receipt of the document before effecting any transaction in a penny stock for the investor’s account.  Potential investors in our common stock are urged to obtain and read such disclosure carefully before purchasing any shares that are deemed to be “penny stock.”  Further, the Exchange Act requires broker-dealers dealing in penny stocks to approve the account of any investor for transactions in such stocks before selling any penny stock to that investor.  These procedures require the broker-dealer to (i) obtain from the investor information concerning his, her or its financial situation, investment experience and investment objectives; (ii) reasonably determine, based on that information, that transactions in penny stocks are suitable for the investor, and that the investor has sufficient knowledge and experience as to be reasonably capable of evaluating the risks of penny stock transactions; (iii) provide the investor with a written statement setting forth the basis on which the broker dealer made the determination in (ii) above; and (iv) receive a signed and dated copy of such statement from the investor, confirming that it accurately reflects the investor’s financial situation, investment experience and investment objectives.  Compliance with these requirements may affect the ability or willingness of broker-dealers to sell our securities, and accordingly would affect the ability of stockholders to sell their securities in the public market. These additional procedures could also limit our ability to raise additional capital in the future.

We do not currently pay dividends on our common stock and thus stockholders must look to appreciation of our common stock to realize a gain on their investments.

We do not currently pay dividends on our common stock and intend to retain our cash and future earnings, if any, to fund our business plan.  Our future dividend policy is within the discretion of our board of directors and will depend upon various factors, including our business, financial condition, results of operations and capital requirements.  We therefore cannot offer any assurance that our board of directors will determine to pay special or regular dividends in the future.  Accordingly, unless our board of directors determines to pay dividends, stockholders will be required to look to appreciation of our common stock to realize a gain on their investment.  There can be no assurance that this appreciation will occur. 

Provisions in our certificate of incorporation and by-laws could have effects that conflict with the interest of shareholders.

Some provisions in our certificate of incorporation and by-laws could make it more difficult for a third party to acquire control of us.  For example, our board of directors is divided into three classes with directors having staggered terms of office, our board of directors has the ability to issue preferred stock without shareholder approval, and there are advance notification provisions for director nominations and submissions of proposals from shareholders to a vote by all the shareholders under the by-laws.  Florida law also has anti-takeover provisions in its corporate statute.

 
 
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We have a shareholder protection rights plan that may delay or discourage someone from making an offer to purchase the company without prior consultation with the board of directors and management, which may conflict with the interests of some of the shareholders. 

On November 17, 2005, as amended on November 20, 2015 and November 20, 2020, our board of directors adopted a shareholder protection rights plan which called for the issuance, on November 29, 2005, as a dividend, of rights to acquire fractional shares of preferred stock.  The rights are attached to the shares of common stock and transfer with them.  In the future, the rights may become exchangeable for shares of preferred stock with various provisions that may discourage a takeover bid.  Additionally, the rights have what are known as “flip-in” and “flip-over” provisions that could make any acquisition of the company more costly.  The principal objective of the plan is to cause someone interested in acquiring the company to negotiate with the board of directors rather than launch an unsolicited bid.  This plan may limit, prevent, or discourage a takeover offer that some shareholders may find more advantageous than a negotiated transaction.  A negotiated transaction may not be in the best interests of the shareholders.

Item 1B.  Unres olved Staff Comments. 

Not applicable.

Item 2.  Pr operties.

Until the expiration of our lease in October 2020, our headquarters were located in a 3,000 square foot leased facility in Jacksonville, Florida.    Beginning in November 2020, we reverted to remote worksites for all of our employees in light of the pandemic.  We believe a remote work environment is currently suitable for the conduct of our business.  We have an additional 7,000 square foot leased facility in Lake Mary, Florida that was primarily for engineering design activities.  We have ceased use of the Lake Mary facility and are attempting to sublease the facility for the remaining lease term.  Refer to Note 8 to our consolidated financial statements included in Item 8 for information regarding our outstanding lease obligations.

Item 3.  Legal Proce edings.

We are a party to a number of patent enforcement actions initiated by us against others for the infringement of our technologies, as well as proceedings brought by others against us in an attempt to invalidate certain of our patent claims.  These patent-related proceedings are more fully described in Note 12 to our consolidated financial statements included in Item 8. 

Item 4.  Mine Safety Discl osures.

Not applicable.

 
 
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PAR T II

Item 5.  Mar ket for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

Market Information

Since August 17, 2018, our Common Stock has been listed on the OTCQB, an over-the-counter market, under the ticker symbol “PRKR”.  Over-the-counter market quotations reflect inter-dealer prices, without retail mark-up, mark-down, or commission, and may not necessarily represent actual transactions.  

Holders

As of March 8, 2021, we had approximately 109 holders of record and we believe there are approximately 7,200 beneficial holders of our common stock.

Dividends

We do not currently pay dividends on our common stock and intend to retain our cash and future earnings, if any, to fund our business plan.  The payment of cash dividends in the future will be dependent upon our revenue and earnings, if any, capital requirements and general financial condition.  The payment of any dividends will be within the discretion of our board of directors.

Purchases of Equity Securities by Issuer and Affiliated Purchasers

No purchases of our equity securities have been made by us or affiliated purchasers within the fourth quarter of the fiscal year ended December 31, 2020. 

Item 6.  Selec ted Financial Data.

Not applicable.  
 
Item 7.  Man agement's Discussion and Analysis of Financial Condition and Results of Operations.

Executive Overview

We are in the business of innovating fundamental wireless technologies and products.  We have designed and developed proprietary RF technologies and integrated circuits for use in wireless communication products. We have expended significant financial and other resources to research and develop our RF technologies and to obtain patent protection for those technologies in the U.S. and certain foreign jurisdictions.  We believe certain patents protecting our proprietary technologies have been broadly infringed by others and therefore our business plan primarily consists of enforcement of our intellectual property rights through patent infringement litigation and licensing efforts.  We currently have patent enforcement actions ongoing in various U.S. district courts against providers of mobile handsets, smart televisions and other WiFi products and, in certain cases, their chip suppliers for the infringement of a number of our RF patents.  We have made significant investments in developing and protecting our technologies, the returns on which are dependent upon the generation of future revenues for realization.

In 2018, we restructured our operations to reduce operating expenses.  As part of that restructuring, we made significant reductions in our investment in the development and marketing of a consumer distributed WiFi product line marketed under the brand name Milo®.  Our cost reduction measures
 
 
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included the closure of our engineering design center in Lake Mary, Florida and a reduction in executive and management salaries.  In early 2019, we ceased substantially all ongoing research and development efforts and, where applicable, repurposed resources to support our patent enforcement and product sales and support efforts. We ceased sales of our Milo products in the fourth quarter of 2019 and are currently focused exclusively on our patent enforcement litigation and licensing efforts.    

We continue to aggressively pursue licensing opportunities with wireless communications companies that make, use or sell chipsets and/or products that incorporate RF.  We believe there are a number of wireless communications companies that can benefit from the use of the RF technologies we have developed, whether through a license or, in certain cases, a joint product venture that may include licensing rights.  Our licensing efforts to date have required  litigation in order to enforce and/or defend our intellectual property rights.  Since 2011, we have been involved in patent infringement litigation against Qualcomm and others for the unauthorized use of our technology.  Refer to Note 12 to our consolidated financial statements included in Item 8 for a complete discussion of our legal proceedings.  We have expended significant resources since 2011 and incurred significant debt for the enforcement and defense of our intellectual property rights. 

Recent Developments

Equity and Debt Financings
In January 2021, we received aggregate proceeds of approximately $1.0 million from the sale of common stock to accredited investors at a price of $0.35 per share.  The securities purchase agreements include contingent payment rights identical to the unsecured contingent payment obligations incurred in 2020 (see “Contingent Payment Obligations” included under Financial Condition).  Approximately $0.4 million in proceeds for this transaction was received as of December 31, 2020 and recorded as an accrued liability until the consummation of the transaction.    We entered into registration rights agreements with the investors pursuant to which we will register the shares.  We have committed to file the registration statement by April 15, 2021 and to cause the registration statement to become effective by June 30, 2021. The registration rights agreements provide for liquidated damages upon the occurrence of certain events including failure by us to file the registration statement or cause it to become effective by the deadlines set forth above. The amount of the liquidated damages is 1.0% of the aggregate subscription upon the occurrence of the event, and monthly thereafter, up to a maximum of 6%, or approximately $0.06 million.
 
In March 2021, we received aggregate proceeds of approximately $4.2 million from the sale of common stock and warrants to accredited investors at a price of $1.29 per share of common stock.   The warrants have an exercise price of $1.75 and expire in March 2026.  We entered into registration rights agreements with the investors pursuant to which we will register the shares.  We have committed to file the registration statement within 30 days and to cause the registration statement to become effective within 90 days. The registration rights agreements provide for liquidated damages upon the occurrence of certain events including failure by us to file the registration statement or cause it to become effective by the deadlines set forth above. The amount of the liquidated damages is 1.0% of the aggregate subscription upon the occurrence of the event, and monthly thereafter, up to a maximum of 6%, or approximately $0.25 million.  The majority of the proceeds from this transaction were used to satisfy our obligations to Mintz (see “Mintz Agreement” below).

Share Based Compensation Arrangements
On January 11, 2021, the Board amended the 2019 Long-Term Incentive Plan to increase the number of shares of common stock reserved for issuance under the 2019 Plan from 12 million to 27 million shares.
 
The Board also approved grants, under the 2019 Plan, of two-year options, with an exercise price of $0.54 per share, vesting in 8 equal quarterly installments commencing on March 31, 2021 and expiring on
 
 
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January 11, 2026. The grants under the 2019 Plan included an option to purchase 8,000,000 shares granted to Jeffrey Parker, an option to purchase 1,000,000 shares granted to Cynthia French, an option to purchase 380,000 shares to each of the three non-employee directors, and options to purchase an aggregate of 2,900,000 shares granted to other key employees.

On January 25, 2021, we amended our business consulting and retention agreement with Chelsea to increase the compensation for services over the remaining term and to extend the term of the agreement through February 2024.  As consideration for the amended agreement, we issued 500,000 shares of unregistered common stock in exchange for a nonrefundable retainer for services valued at approximately $0.33 million.  The value of the stock issued is being recognized as consulting expense over the term of the agreement. 

On March 9, 2021, we granted approximately 32,000 shares under our 2019 Long-Term Incentive Plan to a consultant for business communications services over a one-year term valued at approximately $0.05 million.

Warrant and Option Exercises
During the three months ended March 31, 2021, we received aggregate proceeds of $0.  4 million from the exercise of outstanding options and warrants at an average exercise price of $0.16 per share. 

Mintz Agreement
As of December 31, 2020, we had approximately $3.1 million in accounts payable to Mintz and an outstanding balance of approximately $0.03 million on a secured note payable to Mintz for legal fees and expenses.  In addition, we had approximately $3.6 million in disputed legal fees and expenses billed by Mintz that we treated as a loss contingency that was not probable as of December 31, 2020 and 2019 and accordingly, for which we recognized no expense in the consolidated financial statements.  In March 2021, we entered into an agreement with Mintz to satisfy our outstanding obligations and reduce any future contingency fees payable to Mintz.  On March 29, 2021, we paid Mintz a lump-sum payment of $3.0 million in satisfaction of our outstanding obligations to Mintz including the Mintz note, our accounts payable to Mintz, and all disputed and unrecorded billings.  Mintz waived all past defaults on the Mintz note and agreed to a significant reduction in future success fees payable to Mintz from patent-related proceeds.

Legal Proceedings
On March 26, 2021, the district court in the Middle District of Florida, Orlando Division, issued an order that, among other things, postponed our trial date in ParkerVision v. Qualcomm citing backlog due to the pandemic as a factor.  A new trial date has not yet been set but is unlikely to be scheduled prior to November or December 2021 according to the court. 

Liquidity and Capital Resources

We have incurred significant losses from operations and negative cash flows in every year since inception, largely as a result of our significant investments in developing and protecting our intellectual property.  For the year ended December 31, 2020, we incurred a net loss of approximately $19.6 million and negative cash flows from operations of approximately $4.8 million.  At December 31, 2020, we had a working capital deficit of approximately $3.8 million and an accumulated deficit of approximately $421.4 million.  Our independent registered public accounting firm has included in their audit report an explanatory paragraph expressing substantial doubt about our ability to continue as a going concern.  See Note 2 to our consolidated financial statements included in Item 8 for a discussion of our liquidity and our ability to continue as a going concern.

 
 
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Our working capital deficit is primarily the result of approximately $4.1 million in accounts payable related to outstanding litigation fees and expenses.  Our working capital improved by $1.7 million from 2019 to 2020, primarily as the result of the increase in our cash and cash equivalents from debt and equity financings. Our use of cash for operations increased 42%, from $3.4 million in 2019 to $4.8 million in 2020.  This increase is primarily the result of increased legal expenses associated with our patent enforcement efforts.  Our operations in 2020 were primarily funded through approximately $6.0 million in proceeds from debt and equity financings, as well as $1.6 million received from the exercise of warrants.  Comparatively, we received net proceeds of approximately $3.1 million from debt financings in 2019.  We used $1.3 million and $1.2 million in cash to repay outstanding debt obligations in 2020 and 2019, respectively. These debt repayments were primarily related to a secured note payable with Mintz which had an outstanding balance of $0.03 million at December 31, 2020 and was repaid in full in the first quarter of 2021.

At December 31, 2020, we had approximately $0.19 million in current debt obligations, including $0.07 million related to a Paycheck Protection Program loan, which we believe will be forgiven, based on the program criteria.  This represents a decrease of $1.3 million from our current debt obligations at December 31, 2019.  The decrease in our current debt repayment obligations is primarily the result of $1.2 million in repayments made on the Mintz note in 2020. 

We had cash and cash equivalents of approximately $1.6 million at December 31, 2020.  We received an additional $5.6 million in proceeds from debt and equity financings and warrant and option exercises in the first quarter of 2021, of which $3.0 million was used to settle outstanding accounts and notes payable for litigation costs.  Our remaining capital resources will be used to fund our current obligations and ongoing operating costs; however these resources may not be sufficient to meet our liquidity needs for the next twelve months and we may be required to seek additional capital.

Our ability to meet our short-term liquidity needs, including our debt repayment obligations, is dependent upon one or more of (i) our ability to successfully negotiate licensing agreements and/or settlements relating to the use of our technologies by others in excess of our contingent payment obligations to Brickell and legal counsel; and/or (ii) our ability to raise additional capital from the sale of equity securities or other financing arrangements. 

Significant portions of our litigation costs to date have been funded by contingent payment arrangements with legal counsel.  Fee discounts offered by legal counsel in exchange for contingent payments upon successful outcome in our litigation are not recognized in expense until such time that the related proceeds on which the contingent fees are payable are considered probable.  Contingent fees vary based on each firm’s specific fee agreement.  We currently have contingent fee arrangements in place for all of our active cases.

In addition to contingent fee arrangements with legal counsel, we have a contingent repayment obligation to Brickell that was recorded at its estimated fair value of $33.1 million at December 31, 2020.  Brickell is entitled to a  priority, prorated payment of up to 100% of proceeds received by us from funded patent-related actions up to a specified minimum return.  Brickell’s minimum return is determined as a multiple of the outstanding funded amount that increases over time.  The estimated minimum return due to Brickell if repaid in full at December 31, 2020 is approximately $42 million, an increase of approximately $3 million, or 8%, from the minimum return that would have been due to Brickell as of December 31, 2019.  In addition, in 2020 we incurred unsecured contingent payment obligations in connection with various financings.  These unsecured contingent payment obligations are recorded at an aggregate estimated fair value of $5.2 million, with a maximum payment obligation of $9.7 million at December 31, 2020.  

 
 
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Although current working capital will not be used to repay our contingent arrangements,  based on our current outstanding legal proceedings, funding arrangements and contingent payment arrangements,  we estimate that up to 100% of our initial future proceeds will be used to repay contingent payment arrangements until Brickell’s minimum return has been met.  After repayment of Brickell’s minimum return, we estimate that 45% to 65% of estimated future proceeds from current actions could be payable to others, depending on the proceeding and the nature, amount and timing of proceeds, among other factors. 

Patent enforcement litigation is costly and time-consuming and the outcome is difficult to predict.  We expect to continue to invest in the support of our patent enforcement and licensing programs.  We expect that revenue generated from patent enforcement actions and/or technology licenses in 2021, if any, after deduction of payment obligations to Brickell and legal counsel, may not be sufficient to cover our operating expenses.  In the event we do not generate revenues, or other patent-related proceeds, sufficient to cover our operational costs and contingent repayment obligation, we will be required to raise additional working capital through the sale of equity securities or other financing arrangements.

The long-term continuation of our business plan is dependent upon our ability to secure sufficient financing to support our business, and our ability to generate revenues and/or patent-related proceeds sufficient to offset expenses and meet our contingent payment obligation and other long-term debt repayment obligations.  Failure to generate sufficient revenues, raise additional capital through debt or equity financings, and/or reduce operating costs could have a material adverse effect on our ability to meet our short and long-term liquidity needs and achieve our intended long-term business objectives.

Financial Condition

Intangible Assets
We consider our intellectual property, including patents, patent applications, trademarks, copyrights and trade secrets to be significant to our business.  Our intangible assets are pledged as security for our secured contingent payment obligation with Brickell and our secured note payable with our litigation counsel.  The net book value of our intangible assets was approximately $2.2 million and $2.9 million as of December 31, 2020 and 2019, respectively.  These assets are amortized using the straight-line method over their estimated period of benefit, generally fifteen to twenty years.  The decrease in the carrying value of our intangible assets is primarily the result of $0.4 million in patent amortization expense recognized in 2020 as our portfolio matures and a $0.3 million loss on abandonment of certain patents and patent applications.  Management evaluates the recoverability of intangible assets periodically and takes into account events or circumstances that may warrant revised estimates of useful lives or that may indicate impairment exists.  As part of our ongoing patent maintenance program, we may, from time to time, abandon a particular patent if we determine fees to maintain the patent exceed its expected recoverability.  For the years ended December 31, 2020 and 2019, we incurred losses of approximately $0.3 million and $0.4 million, respectively, for the write-off of specific patent assets. These losses are included in operating expenses in the accompanying consolidated statements of comprehensive loss.

Contingent Payment Obligations
We have a secured and unsecured contingent payment obligations recorded at an aggregate estimated fair value of $38.3 million and $26.7 million as of December 31, 2020 and 2019, respectively.  These repayment obligations are contingent upon receipt of proceeds from patent enforcement and other patent monetization actions.  As a result, we have elected to account for these contingent payment obligations at their estimated fair values which are subject to significant estimates and assumptions as discussed in “Critical Accounting Policies” below.     Refer to Note 10 to our consolidated financial statements
 
 
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included in Item 8 for a discussion of the fair value measurement of our contingent payment obligation.

Our secured contingent payment obligation is payable to Brickell under a 2016 funding agreement, as amended from time to time.   Brickell has a right to reimbursement and compensation from gross proceeds resulting from patent enforcement and other patent monetization actions on a priority basis.  The amount of our obligation varies based on the magnitude, timing and nature of proceeds received by us. 

In addition, in 2020, we incurred unsecured contingent payment obligations in connection with various funding arrangements.  The contingent payment obligations are payable from our share of patent-related proceeds after satisfaction of our obligation to Brickell and payment of contingent fees to legal counsel. 

The  $11.6 million increase in estimated fair value of our contingent payment obligations from 2019 to 2020 is the result of $3.2 million in new unsecured payment obligations incurred and an $8.4 million increase in the estimated fair value of the contingent obligations.  See “Change in Fair Value of Contingent Obligations” below for a discussion of the increase in fair value.  

Notes Payable
As of December 31, 2020, we had approximately $1.0 million in notes payable, including an unsecured promissory note payable to Sterne, Kessler, Goldstein, & Fox, PLLC (“SKGF”), a related party, of approximately $0.8 million, a secured promissory note payable to Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. (“Mintz”) of $0.03 million, and a loan from the Paycheck Protection Program (PPP) of approximately $0.2 million.   Failure to comply with the payment terms of each of these notes constitutes an event of default which, if uncured, will result in the entire unpaid principal balance of the note and any unpaid, accrued interest to become immediately due and payable.  In addition, an event of default results in an increase in the interest rate under the SKGF and Mintz notes to a default rate of 12% per annum. We were in default on the payment provisions of the Mintz note since November 2019 and, accordingly, accrued interest at the default rate.  In March 2021, we settled our outstanding obligations with Mintz (as more fully discussed in “Recent Developments”) and Mintz waived all past defaults on the note which has been paid in full.  In addition, in March 2021, we started the application process for forgiveness of the PPP loan.  Based on the PPP loan forgiveness criteria, we anticipate that we will qualify for forgiveness of the entire principal amount of this loan.

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, 2020, we had net deferred tax assets of approximately $94 million, primarily related to our NOL carryforwards, which were fully offset by a valuation allowance due to the uncertainty related to realization of these assets through future taxable income.  In addition, our ability to benefit from our NOL and other tax credit carryforwards could be limited under Section 382 as more fully discussed in Note 11 to our consolidated financial statements included in Item 8.

Results of Operations for Each of the Years Ended December 31, 2020 and 2019

Revenues and Gross Margins

We reported no licensing revenue for the years ended December 31, 2020 or 2019.  Although we do anticipate licensing revenue and/or settlement gains to result from our licensing and patent enforcement
 
 
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actions, the amount and timing is highly unpredictable and there can be no assurance that we will achieve our anticipated results. 

We reported no product revenue during the year ended December 31, 2020 and minimal product revenue for the year ended December 31, 2019, from the sales of our Milo-branded products.  We discontinued sales of Milo products in the fourth quarter of 2019 and recognized an impairment charge for our remaining inventory, resulting in negative gross margins on our product sales. 

Research and Development Expenses

Research and development expenses consist primarily of engineering and related management and support personnel costs; fees for outside engineering design services which we use from time to time to supplement our internal resources; depreciation expenses related to certain assets used in product development; prototype production and materials costs for both chips and end-user products; software licensing and support costs, which represent the annual licensing and support maintenance for engineering design and other software tools; and rent and other overhead costs for our engineering design facility.  Personnel costs include share-based compensation which represents the grant date fair value of equity-based awards to our employees which is attributed to expense over the service period of the award.  Subsequent to March 31, 2019, we halted substantially all research and development efforts and, where applicable, repurposed prior engineering resources to support our patent enforcement programs or our Milo sales and support.

The  $0.3 million decrease in research and development expenses from 2019 to 2020 is primarily the result of $0.2 million in personnel and related costs being repurposed for selling, general and administrative purposes, including litigation support and Milo sales and support as well as a $0.1 million reduction in research and development personnel costs.

Selling, General, and Administrative Expenses

Selling, general and administrative expenses consist primarily of 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 $10.7 million for the year ended December 31, 2020, as compared to approximately $7.6 million for the year ended December 31, 2019, representing an increase of approximately $3.1 million or 41%.  This increase is primarily due to the recognition of $2.2 million in noncash charges upon amendment of equity-related agreements.  In addition, we had a $1.3 million increase in litigation expenses primarily related to preparation of the infringement case against Qualcomm and Apple in Florida in early 2020 and a $0.6 million increase in share-based compensation due to executive and Board equity awards granted in August 2019 and the first quarter of 2020.  These increases were somewhat offset by a decrease of $0.3 million in board compensation expenses due to the reversal of prior board compensation expense upon the settlement of previously accrued board fees in exchange for equity based awards in 2020, a decrease of $0.2 million in rent and related overhead due to the down-sizing of our corporate headquarters in July 2019, and a decrease in depreciation and amortization of $0.3 million resulting from lower cost bases of fixed assets and patents following disposals during 2019 and 2020.  

Change in Fair Value of Contingent Payment Obligations 

 
 
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We have elected to measure our secured and unsecured contingent payment obligations at fair value which is based on significant unobservable inputs.  We estimated the fair value of our secured contingent payment obligations using a probability-weighted income approach based on the estimated present value of projected future cash outflows using a risk-adjusted discount rate.  Increases or decreases in the significant unobservable inputs could result in significant increases or decreases in fair value.

For the year ended December 31, 2020, we recorded an increase in the fair value of our secured and unsecured contingent payment obligations of approximately $8.4 million.  The change in fair value estimates are a result of changes in estimated amounts and timing of projected future cash flows primarily due to the passage of time and changes in the probabilities of future cash outflows based on the status of the funded actions.   In addition, in 2020, increases in fair value resulted from the sharp decrease in the risk-free interest rate used in the calculation as a result of the Federal Reserve lowering rates to stimulate economic activity amidst the COVID-19 pandemic.

Critical Accounting Policies

We believe that the following are critical accounting policies and estimates that significantly impact the preparation of our consolidated financial statements:

Contingent Payment Obligations
We have accounted for our secured and unsecured contingent payment obligations as long-term debt.  Our repayment obligations are contingent upon the receipt of proceeds from patent enforcement or other patent monetization actions.  We have elected to measure our contingent payment obligations at their estimated fair values based on the variable and contingent nature of the repayment provisions. We have determined that the fair value of our secured and unsecured contingent payment obligations falls within Level 3 in the fair value hierarchy, which involves significant estimates and assumptions including projected future patent-related proceeds and the risk-adjusted rate for discounting future cash flows.  Actual results could differ from the estimates made. Changes in fair value, including the component related to imputed interest, are included in the consolidated statements of comprehensive loss under the heading “Change in fair value of contingent payment obligations.”  Refer to Note 10 to our consolidated financial statements included in Item 8 for a discussion of the significant estimates and assumptions used in estimated the fair value of our contingent payment obligations.  

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 that 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 Pronouncements
In August 2020, the FASB issued ASU 2020-06 "Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity's Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity's Own Equity."  This ASU simplifies accounting for convertible instruments by removing major separation models required under current U.S. GAAP.   Consequently, more convertible debt instruments will be reported as a single liability instrument with no separate accounting for embedded conversion features. The ASU removes certain settlement
 
 
 21 
 
 
 
conditions that are required for equity contracts to qualify for the derivative scope exception, which will permit more equity contracts to qualify for the exception.  The ASU also simplifies the diluted earnings per share (EPS) calculation in certain areas. The ASU is effective for fiscal years beginning after December 15, 2021 for accelerated filers and for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years, for smaller reporting companies.  Early adoption is permitted for fiscal years beginning after December 15, 2020.  The ASU provides for a modified retrospective method of adoption whereby the guidance is applied to transactions outstanding at the beginning of the fiscal year of adoption with the cumulative effect of the change being recorded as an adjustment to beginning retained earnings. We plan to adopt ASU 2020-06 as of January 1, 2021.  Adoption of ASU 2020-06 will result in an increase to our long-term debt of approximately $0.8 million, a decrease in additional paid-in-capital of approximately $1.1 million and an adjustment to our beginning retained deficit of $0.3 million resulting from the elimination of the previously recognized beneficial conversion feature as a debt discount.

Off-Balance Sheet Transactions

As of December 31, 2020, we had outstanding warrants to purchase 12.9 million shares of our common stock.  The estimated grant date fair value of these warrants of approximately $1.7 million is included in shareholders’ deficit in our consolidated balance sheet for the year ended December 31, 2020.  The outstanding warrants have an average exercise price of $0.45 per share and a weighted average remaining life of approximately 3 years. 
 
 Item 7A. Quantitative and Qualitative Disclosures About Market Risk.

Not applicable.
 
 
 22 
 
 
 
 
 Item 8.  Financial Statements and Supplementary Data.


 
 

 
 
Index to Consolidated Financial Statements

 
Page
 
   24 

 
 
FINANCIAL STATEMENTS:
 
 
 
   26 
 
   27 
 
   28 
 
   29 
 
   30 

 
 
SUPPLEMENTARY DATA:
 
 
Not applicable
 
 

 
 
 23 
 
 
 
 
Report of Independent Registered Public Accounting Firm  

To the Board of Directors and Shareholders of ParkerVision, Inc.

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheets of ParkerVision, Inc. (the “Company”) and its subsidiary as of December 31, 2020 and 2019, and the related consolidated statements of comprehensive loss, shareholders’ deficit and cash flows for each of the years in the two-year period ended December 31, 2020, and the related notes (collectively referred to as the “consolidated financial statements”).  In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company and its subsidiary as of December 31, 2020 and 2019, and the results of their operations and their cash flows for each of the years in the two-year period ended December 31, 2020 in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management.  Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits.  We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB.  Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.  The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.  As a part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.  Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks.  Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements.  Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.  We believe that our audits provide a reasonable basis for our opinion.


 
 
 
 24 
 
 
 
 
Emphasis of Matter Regarding Going Concern

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the consolidated financial statements, the Company has suffered recurring losses from operations and has a net capital deficiency that raise substantial doubt about its ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 2. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.  Our opinion is not modified with respect to this matter.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

  Estimation of fair value of contingent payment obligations

As disclosed in Note 1 of the Company’s consolidated financial statements, the Company accounts for their secured and unsecured contingent payment obligations as long-term debt. Their payment obligations are contingent upon the receipt of proceeds from patent enforcement and/or patent monetization actions.  The Company has elected to measure their contingent payment obligations at their estimated fair values.  The Company recorded the fair value of their contingent payment obligations at approximately $38,279,000 as of December 31, 2020.

Auditing management’s estimate of the fair value of their contingent payment obligations involved subjective evaluation and high degree of auditor judgement due to significant assumptions involved in estimating the receipt of proceeds from patent enforcement and/or patent monetization actions.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements.  We obtained an understanding and evaluated the design of internal controls that address the risks of material misstatement relating to recording the contingent payment obligations at fair value.  We tested the accuracy and completeness of the underlying data used in calculating the fair value.  We evaluated management’s ability to accurately estimate the assumptions used to develop the fair value of the contingent payment obligations.  We also involved an independent legal firm to assist in evaluating the reasonableness of the assumptions of future litigation outcomes used by the Company in estimating the receipt of proceeds from patent enforcement and/or patent monetization actions. 

/s/ MSL, P.A.

We have served as the Company’s auditor since 2019.

Fort Lauderdale, Florida
March 31, 2021 
 
 
 
 
 
 25 
 
PARKERVISION, INC.
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2020 AND 2019
 

 
 
 
 
 
 

 
 
 
 
 

2020
 
2019
CURRENT ASSETS:
 
 
 
 
 
Cash and cash equivalents
$
1,627 
 
$
57 
Prepaid expenses
 
599 
 
 
505 
Other current assets
 
 
 
117 
Total current assets
 
2,234 
 
 
679 

 
 
 
 
 
Property and equipment, net
 
30 
 
 
70 
Intangible assets, net
 
2,170 
 
 
2,878 
Operating lease right-of-use assets
 
10 
 
 
283 
Other assets, net
 
12 
 
 
16 
Total assets
$
4,456 
 
$
3,926 

 
 
 
 
 
CURRENT LIABILITIES:
 
 
 
 
 
Accounts payable
$
4,318 
 
$
2,328 
Accrued expenses:
 
 
 
 
 
Salaries and wages
 
19 
 
 
78 
Professional fees
 
128 
 
 
499 
Statutory court costs
 
251 
 
 
369 
Other accrued expenses
 
936 
 
 
1,081 
Related party note payable, current portion
 
100 
 
 
86 
Secured note payable, current portion
 
26 
 
 
1,222 
Unsecured notes payable
 
65 
 
 
225 
Operating lease liabilities, current portion
 
146 
 
 
250 
Total current liabilities
 
5,989 
 
 
6,138 

 
 
 
 
 
LONG-TERM LIABILITIES:
 
 
 
 
 
Secured contingent payment obligation
 
33,057 
 
 
26,651 
Unsecured contingent payment obligations
 
5,222 
 
 
 -
Convertible notes, net
 
3,018 
 
 
2,733 
Related party note payable, net of current portion
 
703 
 
 
793 
Operating lease liabilities, net of current portion
 
159 
 
 
305 
Other long-term liabilities
 
129 
 
 
403 
Total long-term liabilities
 
42,288 
 
 
30,885 
Total liabilities
 
48,277 
 
 
37,023 

 
 
 
 
 
COMMITMENTS AND CONTINGENCIES
 
 
 
 
 

 
 
 
 
 
SHAREHOLDERS' DEFICIT:
 
 
 
 
 
Common stock, $.01 par value, 140,000 and 110,000 shares authorized, 58,591 and 34,097 issued and outstanding at December 31, 2020 and 2019, respectively
 
586 
 
 
341 
Additional paid-in capital
 
376,954 
 
 
368,345 
Accumulated deficit
 
(421,361)
 
 
(401,783)
Total shareholders' deficit
 
(43,821)
 
 
(33,097)
Total liabilities and shareholders' deficit
$
4,456 
 
$
3,926 

 
 
 
 
 
 

 
 
 
The accompanying notes are an integral part of these consolidated financial statements.
 
 26 
 
 
PARKERVISION, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
FOR THE YEARS ENDED DECEMBER 31, 2020 AND 2019
(in thousands, except per share amounts)
 

 
 
 
 
 
 

 
 
 
 
 
 

2020
 
2019
 
Product revenue
$
 -
 
$
74 
 

 
 
 
 
 
 
Cost of sales - product
 
 -
 
 
73 
 
Loss on impairment of inventory
 
 -
 
 
 
Gross margin
 
 -
 
 
(5)
 

 
 
 
 
 
 
Research and development expenses
 
 -
 
 
334 
 
Selling, general, and administrative expenses
 
10,664 
 
 
7,602 
 
Total operating expenses
 
10,664 
 
 
7,936 
 

 
 
 
 
 
 
Interest and other income
 
 -
 
 
 
Interest and other expense
 
(547)
 
 
(421)
 
Change in fair value of contingent payment obligations
 
(8,367)
 
 
(1,094)
 
Total interest and other
 
(8,914)
 
 
(1,512)
 

 
 
 
 
 
 
Net loss before income tax
 
(19,578)
 
 
(9,453)
 

 
 
 
 
 
 
Income tax expense
 
 -
 
 
 -
 

 
 
 
 
 
 
Net loss
 
(19,578)
 
 
(9,453)
 

 
 
 
 
 
 
Other comprehensive income, net of tax
 
 -
 
 
 -
 

 
 
 
 
 
 
Comprehensive loss
$
(19,578)
 
$
(9,453)
 

 
 
 
 
 
 
Basic and diluted net loss per common share
$
(0.42)
 
$
(0.30)
 

 
 
 
 
 
 
Weighted average common shares outstanding
 
47,019 
 
 
31,461 
 

 
 
 
 
 
 
 

 
 
 
 
The accompanying notes are an integral part of these consolidated financial statements.
 
 27 
 
PARKERVISION, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ DEFICIT
FOR THE YEARS ENDED DECEMBER 31, 2020 AND 2019
(in thousands)
 

 
 
 
 
 
 
 
 
 
 
 
 

 
 
 
 
 
 
 
 
 
 
 
 

 
Common Stock, Par Value
 
 
Additional Paid-in Capital
 
Accumulated
Deficit
 
Total
Shareholders'
Deficit
Balance as of December 31, 2018
 
$
287 
 
 
366,695 
 
 
(392,292)
 
 
(25,310)
Cumulative effect of change in accounting principle
 
 
 -
 
 
 -
 
 
(38)
 
 
(38)
Issuance of common stock upon exercise of warrants
 
 
29 
 
 
 -
 
 
 -
 
 
29 
Issuance of common stock and warrants for services
 
 
 
 
234 
 
 
 -
 
 
240 
Issuance of convertible debt with beneficial conversion feature
 
 
 -
 
 
550 
 
 
 -
 
 
550 
Issuance of common stock upon conversion and payment of interest in kind on convertible debt
 
 
19 
 
 
277 
 
 
 -
 
 
296 
Share-based compensation, net of shares withheld for taxes
 
 
 -
 
 
589 
 
 
 -
 
 
589 
Net loss for the year
 
 
 -
 
 
 -
 
 
(9,453)
 
 
(9,453)
Balance as of December 31, 2019
 
 
341 
 
 
368,345 
 
 
(401,783)
 
 
(33,097)
Issuance of common stock and warrants in private offerings, net of issuance costs
 
 
148 
 
 
4,618 
 
 
 
 
 
4,766 
Issuance of common stock upon exercise of warrants
 
 
45 
 
 
1,530 
 
 
 -
 
 
1,575 
Issuance of common stock and warrants for services
 
 
 
 
297 
 
 
 -
 
 
304 
Issuance of convertible debt with beneficial conversion feature
 
 
 -
 
 
173 
 
 
 -
 
 
173 
Issuance of common stock upon conversion and payment of interest in kind on convertible debt
 
 
15 
 
 
437 
 
 
 -
 
 
452 
Issuance of common stock upon conversion of short-term loans and payables
 
 
22 
 
 
318 
 
 
 -
 
 
340 
Share-based compensation, net of shares withheld for taxes
 
 
 
 
1,236 
 
 
 -
 
 
1,244 
Net loss for the year
 
 
 -
 
 
 -
 
 
(19,578)
 
 
(19,578)
Balance as of December 31, 2020
 
$
586 
 
$
376,954 
 
$
(421,361)
 
$
(43,821)

 
 
 
 
 
 
 
 
 
 
 
 



 

 
 
 
The accompanying notes are an integral part of these consolidated financial statements.
 
 28 
 
 
PARKERVISION, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2020 AND 2019
(in thousands)
 
 

 
 
 
 
 

 
 
 
 
 

2020
 
2019
CASH FLOWS FROM OPERATING ACTIVITIES:
 
 
 
 
 
Net loss
$
(19,578)
 
$
(9,453)
Adjustments to reconcile net loss to net cash used in
operating activities:
 
 
 
 
 
Depreciation and amortization
 
632 
 
 
835 
Share-based compensation
 
1,244 
 
 
589 
Noncash lease expense
 
61 
 
 
280 
Change in fair value of contingent payment obligation
 
8,367 
 
 
1,094 
Loss on disposal/impairment of equipment and other assets
 
487 
 
 
412 
Noncash expense for amendment of equity-related agreements
 
2,211 
 
 
 -
Inventory impairment charges
 
 -
 
 
Changes in operating assets and liabilities:
 
 
 
 
 
Accounts receivable
 
 -
 
 
Finished goods inventories
 
 -
 
 
81 
Prepaid expenses and other assets
 
292 
 
 
221 
Accounts payable and accrued expenses
 
1,757 
 
 
2,790 
Operating lease liabilities
 
(250)
 
 
(230)
Total adjustments
 
14,801 
 
 
6,080 
Net cash used in operating activities
 
(4,777)
 
 
(3,373)

 
 
 
 
 
CASH FLOWS FROM INVESTING ACTIVITIES:
 
 
 
 
 
Proceeds from sale of property and equipment
 
 
 
30 
Purchases of property and equipment
 
(3)
 
 
(5)
Payments for patent costs and other intangible assets
 
 -
 
 
(18)
Net cash (used in)/provided by investing activities
 
(1)
 
 

 
 
 
 
 
CASH FLOWS FROM FINANCING ACTIVITIES:
 
 
 
 
 
Net proceeds from issuance of common stock and contingent payment rights in private offerings
 
4,801 
 
 
 -
Net proceeds from exercise of warrants
 
1,575 
 
 
29 
Net proceeds from debt financings
 
1,244 
 
 
3,068 
Debt repayments
 
(1,272)
 
 
(1,200)
Principal payments on finance lease obligation
 
 -
 
 
(1)
Net cash provided by financing activities
 
6,348 
 
 
1,896 

 
 
 
 
 
NET CHANGE IN CASH AND CASH EQUIVALENTS
 
1,570 
 
 
(1,470)
CASH AND CASH EQUIVALENTS, beginning of year
 
57 
 
 
1,527 
CASH AND CASH EQUIVALENTS, end of year
$
1,627 
 
$
57 

 
 
 
 
 
SUPPLEMENTAL CASH FLOW INFORMATION:
 
 
 
 
 
Cash paid for interest
$
61 
 
$
Cash paid for income taxes
$
 -
 
$
 -

 
 
 
 
 







 
 
 
The accompanying notes are an integral part of these consolidated financial statements.
 
 29 
 
 
 


PARKE RVISION, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2020 and 2019

1. SIGNIFICANT ACCOUNTING POLICIES

ParkerVision, Inc. and its wholly-owned German subsidiary, ParkerVision GmbH (collectively “ParkerVision”, “we” or the “Company”) is in the business of innovating fundamental wireless hardware technologies and products.  We have determined that our business currently operates under a single operating and reportable segment.

We have designed and developed proprietary radio frequency (“RF”) technologies and integrated circuits for use in wireless communication products.  We have expended significant financial and other resources to research and develop our RF technologies and to obtain patent protection for those technologies in the United States of America (“U.S.”) and certain foreign jurisdictions.  We believe certain patents protecting our proprietary technologies have been broadly infringed by others, and therefore the primary focus of our business plan is the enforcement of our intellectual property rights through patent infringement litigation and licensing efforts.  We currently have patent enforcement actions ongoing in various U.S. district courts against providers of mobile handsets, smart televisions and other WiFi products and, in certain cases, their chip suppliers for the infringement of a number of our RF patents.  We have made significant investments in developing and protecting our technologies, the returns on which are dependent upon the generation of future revenues for realization.

In 2018, we restructured our operations to reduce operating expenses.  As part of that restructuring, we made significant reductions in our investment in the development and marketing of a consumer distributed WiFi product line marketed under the brand name Milo®.  In early 2019, we ceased substantially all ongoing research and development efforts and, where applicable, repurposed resources to support our patent enforcement and product sales and support efforts. We ceased sales of our Milo products in the fourth quarter of 2019 and are currently focused exclusively on our patent enforcement litigation and licensing efforts.    

Basis of Presentation
Our consolidated financial statements are prepared in accordance with generally accepted accounting principles in the U.S. (“GAAP”).  Certain reclassifications have been made to prior period amounts to conform to the current period presentation.  The consolidated financial statements include the accounts of ParkerVision, Inc. and our wholly-owned German subsidiary, ParkerVision GmbH, after elimination of all intercompany transactions and accounts.

Use of Estimates in the Preparation of Financial Statements 
The preparation of financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods.  The more significant estimates made by us include projected future cash flows and risk-adjusted discount rates for estimating the fair value of our contingent payment obligations, the volatility and estimated lives of share-based awards used in the estimate of the fair market value of share-based compensation, the assessment of recoverability of long-lived assets, the amortization periods for intangible and long-lived assets, and the valuation allowance for deferred taxes.  Actual results could differ from the estimates made.  We periodically evaluate estimates used in the preparation of the financial statements for continued reasonableness.  Appropriate adjustments, if any, to the estimates used are made prospectively based upon such periodic evaluation.
 
 
 30 
 
 
 
 Cash and Cash Equivalents
We consider cash and cash equivalents to include cash on hand, interest-bearing deposits, overnight repurchase agreements and investments with original maturities of three months or less when purchased. 

Inventory
Inventory is stated at the lower of actual cost, as determined under the first-in, first-out method, or estimated net realizable value.  We review our inventory for estimated obsolescence or unmarketable inventory and write down inventory for the difference between cost and estimated market value based upon assumptions about future demand.  Future demand is affected by market conditions, technological obsolescence, new products and strategic plans, each of which is subject to change.  Due to the decision to discontinue Milo product sales in the fourth quarter of 2019, a full reserve was recorded against the remaining inventory on hand at December 31, 2019.  All remaining inventory was disposed of during the year ended December 31, 2020.

Property and Equipment
Property and equipment are stated at cost, less accumulated depreciation. Depreciation is determined using the straight-line method over the following estimated useful lives:

 
 
 
Manufacturing and office equipment
5-7 years
Leasehold improvements
Shorter of useful life or remaining life of lease
Furniture and fixtures
7 years
Computer equipment and software
3-5 years

The cost and accumulated depreciation of assets sold or retired are removed from their respective accounts, and any resulting net gain or loss is recognized in the accompanying consolidated statements of comprehensive loss.  The carrying value of long-lived assets is reviewed on a regular basis for the existence of facts, both internally and externally, that may suggest impairment. Recoverability of assets to be held and used is measured by comparing the carrying amount of an asset to the estimated undiscounted future cash flows expected to be generated by the asset.  If the carrying amount of the assets exceeds its estimated undiscounted future net cash flows, an impairment charge is recognized in the amount by which the carrying amount of the asset exceeds the fair value of the assets. 

Intangible Assets
We capitalize outside legal costs and agency filing fees incurred in connection with securing the rights to our intellectual property.  Patents, copyrights and other intangible assets are amortized using the straight-line method over their estimated period of benefit.  We estimate the economic lives of our patents and copyrights to be fifteen to twenty years.  Management evaluates the recoverability of intangible assets periodically and takes into account events or circumstances that may warrant revised estimates of useful lives or that may indicate impairment exists.  As part of our ongoing patent maintenance program, we will, from time to time, abandon a particular patent if we determine fees to maintain the patent exceed its expected recoverability. The cost and accumulated amortization of abandoned intangible assets are removed from their respective accounts, and any resulting net loss is recognized in selling, general and administrative expenses in the accompanying consolidated statements of comprehensive loss. 

Contingent Payment Obligations
We have accounted for our secured and unsecured contingent payment obligations as long-term debt in accordance with Accounting Standards Codification (“ASC”) 470-10-25, “Sales of Future Revenues or Various other Measures of Income.” Our payment obligations are contingent upon the receipt of proceeds from patent enforcement and/or patent monetization actions.  We have elected to measure our contingent payment obligations at their estimated fair values in accordance with ASC 825, “Financial Instruments” based on the variable and contingent nature of the repayment provisions. We have determined that the fair
 
 
 31 
 
 
 
value of our secured and unsecured contingent payment obligations falls within Level 3 in the fair value hierarchy, which involves significant estimates, and assumptions including projected future patent-related proceeds and the risk-adjusted rate for discounting future cash flows (see Note 10).  Actual results could differ from the estimates made. Changes in fair value, including the component related to imputed interest, are included in the accompanying consolidated statements of comprehensive loss under the heading “Change in fair value of contingent payment obligations.”

Leases
We adopted ASC 842, “Leases” as of January 1, 2019 which requires the recognition of lease right-of-use (“ROU”) assets and lease liabilities on our consolidated balance sheets for finance and operating leases with initial lease terms of more than 12 months. We elected to use the effective date as the initial application date.  ASC 842 provides a number of practical expedients in transition and we elected 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.  The adoption of this new standard resulted in the recognition of operating lease ROU assets and operating lease liabilities of approximately $0.56 million and $0.60 million, respectively, primarily related to our facilities leases.  Refer to Note 8 for additional disclosures related to our leases.

At inception of a lease, we determine if an arrangement contains a lease and whether that lease meets the classification criteria of a finance or operating lease. Some of our lease arrangements contain lease components (e.g. minimum rent payments) and non-lease components (e.g. services). For certain equipment leases, we account for lease and non-lease components separately based on a relative fair market value basis. For all other leases, we account for the lease and non-lease components (e.g. common area maintenance) on a combined basis.

For operating leases with terms greater than 12 months, we record the ROU asset and lease obligation at the present value of lease payments over the term using the implicit interest rate, when readily available, or our incremental borrowing rate for collateralized debt based on information available at the lease commencement date.  Certain of our leases include rental escalation clauses, renewal options and/or termination options that are factored into our determination of lease payments when it is reasonably certain that the option will be exercised.  We do not recognize ROU assets and lease liabilities for leases with terms at inception of twelve months or less. 

Finance leases are included in property and equipment and other accrued expenses on the consolidated balance sheets. Finance leases are recorded as an asset and an obligation at an amount equal to the present value of the minimum lease payments during the lease term. Amortization expense and interest expense associated with finance leases are included in selling, general, and administrative expense and interest expense, respectively, on the consolidated statements of comprehensive loss. 

Convertible Debt
We have issued debt that is convertible, at the holder’s option, into shares of our common stock at fixed conversion prices.  Certain of the convertible notes were issued with conversion prices that were below market value of our common stock on the closing date resulting in a beneficial conversion feature which we recorded to equity with a corresponding discount to the debt.  The discount is amortized over the life of the notes as interest expense. 

In August 2020, the Financial Accounting Standards Board issued ASU 2020-06 "Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity's Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity's Own Equity."  This ASU simplifies accounting for convertible instruments by removing major separation models required under current U.S. GAAP.  Consequently, more convertible debt instruments will be
 
 
 32 
 
 
 
reported as a single liability instrument with no separate accounting for embedded conversion features.  The ASU removes certain settlement conditions that are required for equity contracts to qualify for the derivative scope exception, which will permit more equity contracts to qualify for the exception.  The ASU also simplifies the diluted earnings per share (EPS) calculation in certain areas.  The ASU is effective for fiscal years beginning after December 15, 2021 for accelerated filers and for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years, for smaller reporting companies.  Early adoption is permitted for fiscal years beginning after December 15, 2020.  The ASU provides for a modified retrospective method of adoption whereby the guidance is applied to transactions outstanding at the beginning of the fiscal year of adoption with the cumulative effect of the change being recorded as an adjustment to beginning retained earnings.

We plan to adopt ASU 2020-06, using the modified retrospective method, as of January 1, 2021.  Adoption of ASU 2020-06 will result in an increase to our long-term debt of approximately $0.8 million, a decrease in additional paid-in-capital of approximately $1.1 million, and an adjustment to our beginning retained deficit of $0.3 million resulting from the elimination of the previously recognized beneficial conversion feature as a debt discount.

Revenue Recognition
We account for revenue under ASC 606, “Revenue from Contracts with Customers” which implements a common revenue standard that clarifies the principles for recognizing revenue.  This revenue recognition model provides a five-step analysis in determining when and how revenue is recognized. 

We expect to derive future revenue from licensing of our intellectual property and settlements from patent infringement disputes.  The timing of revenue recognition and the amount of revenue recognized depends upon a variety of factors, including the specific terms of each arrangement and the nature of our deliverables and obligations.  In general, we recognize revenue when the performance obligations to our customers have been met.  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. 

For the year ended December 31, 2019, we recognized revenue from the sale of products.  For product sales, the performance obligation is generally met at the time product is delivered to the customer.  Estimated product returns are deducted from revenue and 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. 

Research and Development Expenses
Research and development costs are expensed as incurred and include salaries and benefits for employees engaged in research and development activities, costs paid to third party contractors, prototype expenses, an allocated portion of facilities costs, maintenance costs for software development tools, and depreciation.

Accounting for Share-Based Compensation
We have various share-based compensation programs which provide for equity awards including stock options, restricted stock units (“RSUs”) and restricted stock awards (“RSAs”). We calculate the fair value of employee share-based equity awards on the date of grant and recognize the calculated fair value as compensation expense over the requisite service periods of the related awards.  We estimate the fair value of stock option awards using the Black-Scholes option valuation model.  This valuation model requires the use of highly subjective assumptions and estimates including how long employees will retain their
 
 
 33 
 
 
 
stock options before exercising them and the volatility of our common stock price over the expected life of the equity award.  Such estimates, and the basis for our conclusions regarding such estimates, are outlined in detail in Note 14.  Estimates of fair value are not intended to predict actual future events or the value ultimately realized by persons who receive equity awards.  We account for forfeitures of share-based awards as they occur.

As of January 1, 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. At the time of adoption, we did not have any awards to nonemployees that would require reassessment and therefore the adoption of ASU 2018-07 did not impact our consolidated financial statements.

Income Taxes
The provision for income taxes is based on loss before taxes as reported in the accompanying consolidated statements of comprehensive loss.  Deferred tax assets and liabilities are recognized for the expected future tax consequences of events that have been included in the financial statements or tax returns. Deferred tax assets and liabilities are determined based on differences between the financial statement carrying amounts and the tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse.  Valuation allowances are established to reduce deferred tax assets when, based on available objective evidence, it is more likely than not that the benefit of such assets will not be realized.  Our deferred tax assets exclude unrecognized tax benefits which do not meet a more-likely-than-not threshold for financial statement recognition for tax positions taken or expected to be taken in a tax return.

As of January 1, 2019, we adopted ASU 2018-02, “Income Statement - Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income.” The amendments in this update allow a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Cuts and Jobs 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.
 
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, 2020 and 2019 were as follows (in thousands):

 
 
 
 
 

 
 
 
 
 

2020
 
2019
Options outstanding
 
12,240 
 
 
11,410 
Warrants outstanding
 
12,850 
 
 
12,150 
Unvested RSUs
 
187 
 
 
 -
Shares underlying convertible notes
 
23,557 
 
 
20,846 

 
48,834 
 
 
44,406 

 
 
 
 
 

These potential shares were excluded from the computation of diluted loss per share as their effect would have been anti-dilutive.

 
 
 34 
 
 
 
2. LIQUIDITY AND GOING CONCERN

The accompanying consolidated financial statements as of and for the year ended December 31, 2020 were prepared assuming we will continue as a going concern, which contemplates that we will continue in operation and will be able to realize our assets and settle our liabilities and commitments in the normal course of business for a period of at least one year from the issuance date of these consolidated financial statements.  These consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that could result should we be unable to continue as a going concern. 

We have incurred significant losses from operations and negative cash flows in every year since inception and have utilized the proceeds from the sales of our equity and equity-linked securities and our contingent funding arrangements with third-parties to fund our operations, including our litigation costs.  For the year ended December 31, 2020, we incurred a net loss of approximately $19.6 million and negative cash flows from operations of approximately $4.8 million.  At December 31, 2020, we had a working capital deficit of approximately $3.8 million and an accumulated deficit of approximately $421.4 million.  These circumstances raise substantial doubt about our ability to continue to operate as a going concern for a period of one year after the issuance date of these consolidated financial statements.

We had cash and cash equivalents of approximately $1.6 million at December 31, 2020.  We received an additional $5.6 million in proceeds from debt and equity financings and warrant and option exercises in the first quarter of 2021, of which $3.0 million was used to settle outstanding accounts and notes payable for litigation costs (see Note 17).  Our remaining capital resources will be used to fund our current obligations and ongoing operating costs; however these resources may not be sufficient to meet our liquidity needs for the next twelve months and we may be required to seek additional capital.

Our business plan is currently focused solely on our patent enforcement and technology licensing objectives.  The timing and amount of proceeds from our patent enforcement actions are difficult to predict and there can be no assurance we will receive any proceeds from these enforcement actions. 

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 and (ii) our ability to raise additional capital from the sale of debt or equity securities or other financing arrangements.  We anticipate that we will continue to invest in patent protection, 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 our third-party litigation funder and legal counsel, may not be sufficient to cover our operating expenses. In the event we do not generate revenues, or other patent-asset proceeds, sufficient to cover our operational costs and contingent repayment obligation, we will be required to raise additional working capital through the sale of equity securities or other financing arrangements.

The long-term continuation of our business plan is dependent upon our ability to secure sufficient financing to support our business, and our ability to generate revenues and/or patent-related proceeds sufficient to offset expenses and meet our contingent payment obligation and other long-term debt repayment obligations.  Failure to generate sufficient revenues, raise additional capital through debt or equity financings, and/or reduce operating costs could have a material adverse effect on our ability to meet our short and long-term liquidity needs and achieve our intended long-term business objectives.

 
 
 35 
 
 
 
3. INVENTORIES

As of December 31, 2019, we had $0.55 million in finished goods inventories that were fully offset by an inventory reserve.  All of our remaining inventories were disposed of in 2020. 

The following table provides a reconciliation of our inventory reserves for the years ended December 31, 2020 and 2019, respectively (in thousands):    


 
 
 
 
 
 

 
 
 

 
2020
 
2019
Inventory reserves at beginning of year
 
$
550 
 
$
982 
Impairment charges
 
 
 -
 
 
Write down of impaired inventories
 
 
 -
 
 
(438)
Disposal of inventory
 
 
(550)
 
 
 -
Inventory reserves at end of year
 
$
 -
 
$
550 

 
 
 
 
 
 



4. PREPAID EXPENSES

Prepaid expenses consisted of the following at December 31, 2020 and 2019 (in thousands):


 
 
 
 
 

 
 
 
 
 

2020
 
2019
Prepaid services
$
408 
 
$
221 
Prepaid bonds for German statutory costs
 
142 
 
 
188 
Prepaid insurance
 
21 
 
 
62 
Prepaid licenses, software tools and support
 
11 
 
 
17 
Other prepaid expenses
 
17 
 
 
17 

$
599 
 
$
505 

 
 
 
 
 
 

5. PROPERTY AND EQUIPMENT, NET

Property and equipment, at cost, consisted of the following at December 31, 2020 and 2019 (in thousands):


 
 
 
 
 

 
 
 
 
 

2020
 
2019
Equipment and software
$
218 
 
$
260 
Leasehold improvements
 
19 
 
 
33 
Furniture and fixtures
 
30 
 
 
43 

 
267 
 
 
336 
Less accumulated depreciation
 
(237)
 
 
(266)

$
30 
 
$
70 

 
 
 
 
 

Depreciation expense related to property and equipment was approximately $0.03 million and $0.04 million in 2020 and 2019, respectively. 

In connection with the relocation of our corporate headquarters in July 2019 and October 2020, we disposed of a number of assets that were no longer in use.  For the years ended December 31, 2020 and 2019, we recorded a loss on disposal of fixed assets of approximately $0.02 million and $0.01 million, respectively.
 
 
 36 
 
 
 

In connection with the closure of our Lake Mary facility in 2018, we reclassified equipment with a net book value of approximately $0.07 million to assets held for sale.  We contracted with a third party for the consignment sale of these assets and completed sales for several assets in 2019.  For the year ended December 31, 2019, we recognized a net loss of approximately $0.04 million on the sale and/or impairment of assets held for sale.  The gains and losses on the sale or impairment of held for sale assets 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, 2020 and 2019 (in thousands):


 
 
 
 
 

 
 
 
 
 

2020
 
2019

 
 
 
 
 
Patents and copyrights
$
14,948 
 
$
16,612 
Less accumulated amortization
 
(12,778)
 
 
(13,734)

$
2,170 
 
$
2,878 

 
 
 
 
 

Amortization expense for each of the years ended December 31, 2020 and 2019 was approximately $0.4 million and $0.6 million, respectively.  For the years ended December 31, 2020 and 2019, we recorded losses on the disposal of intangible assets of approximately $0.3 million and $0.4 million, respectively.    

Future estimated amortization expense for intangible assets that have remaining unamortized amounts as of December 31, 2020 is as follows (in thousands):


 
 

 
 
2021
$
358 
2022
 
321 
2023
 
283 
2024
 
270 
2025
 
231 
2026 and thereafter
 
707 
Total
$
2,170 

 
 

7. ACCRUED LIABILITIES

Other accrued expenses consisted of the following at December 31, 2020 and 2019 (in thousands):


 
 
 
 
 

2020
 
2019
Advances
$
882 
 
$
500 
Board compensation
 
 -
 
 
413 
Other accrued expenses
 
54 
 
 
168 

$
936 
 
$
1,081 

 
 
 
 
 

Advances include amounts received from litigation counsel as advanced reimbursement of out-of-pocket expenses expected to be incurred by us and, at December 31, 2020, includes approximately $0.4 million received from investors for the purchase of equity securities in a January 2021 transaction (see Note 17). 
 
 
 37 
 
 
 
Board compensation of $0.4 million at December 31, 2019 represents accrued and unpaid board fees from prior periods.  In 2020, current and prior board members agreed to accept share-based compensation awards with an aggregate grant-date fair value of approximately $0.1 million as partial payment for the outstanding fees and waived the remaining unpaid fees.
 
8. LEASES

 We lease our office and other facilities and certain office equipment under long-term, non-cancelable operating and finance leases.  No new finance or operating leases commenced during the years ended December 31, 2020 or 2019 During the year ended December 31, 2020, we recognized an impairment loss of approximately $0.2 million on the ROU asset related to our Lake Mary office lease.  We ceased use of this facility in 2018 as part of a restructuring of our operations.  The value of our ROU asset included estimated future sublease income.  Due to a number of factors, including the high vacancy rate of the building in which the space is located and the current COVID-19 environment, we determined securing a sublease for the space would be unlikely.   The impairment loss recognized in 2020 represented the remaining carrying value of the asset and is included in selling, general, and administrative expenses in our consolidated statements of comprehensive loss.

Lease expense for operating leases is generally recognized on a straight-line basis over the lease term and is included in operating expenses on the consolidated statement of comprehensive loss.  We recognized operating lease costs of $0.1 million and $0.4 million for the years ended December 31, 2020 and 2019, respectively.  

Supplemental Cash Flow Information

The following table summarizes the supplemental cash flow information related to leases, including the ROU assets recognized upon adoption of the new lease standard (in thousands):


 
 
 
 
 
 

 
Year Ended
 
Year Ended

 
December 31,
 
December 31,

 
2020
 
2019
Cash paid for amounts included in the measurement of lease liabilities:
 
 
 
 
 
 
 Operating cash flows from operating leases
 
$
315 
 
$
314 
 Operating cash flows from finance leases
 
 
 -
 
 
 -
 Financing cash flows from finance leases
 
 
 -
 
 

 
 
 
 
 
 
Non-cash activity
 
 
 
 
 
 
Right-of-use assets obtained in exchange for operating lease liabilities
 
 
 -
 
 
563 
Assets obtained in exchange for finance lease liabilities
 
 
 -
 
 
 -

 
 
 
 
 
 

 
 
 38 
 
 
 
 
Other Information

The table below summarizes other supplemental information related to leases:

 
 
 
 

 
 
 
 

 
December 31,
 
December 31,

 
2020
 
2019
Weighted-average remaining lease term (in years):
 
 
 
 
 Operating leases
 
1.7 
 
2.7 
 Finance leases
 
 -
 
0.3 
Weighted average discount rate
 
 
 
 
 Operating leases (1)
 
12.1% 
 
12.0% 
 Finance leases
 
 -
 
8.7% 

 
 
 
 
 
(1)
 
Upon adoption of the new lease standard, discount rates used for existing leases were established at January 1, 2019.

Undiscounted Cash Flows

The future maturities of lease liabilities consist of the following as of December 31, 2020 (in thousands):


 
 
 
 
 
 

 
 
 
 
 
 

 
Operating Leases
 
Finance Leases
2021
 
$
175 
 
$
 -
2022
 
 
166 
 
 
 -
2023
 
 
 
 
 -
Thereafter
 
 
 -
 
 
 -
Total undiscounted lease payments
 
 
345 
 
 
 -
Less: imputed interest
 
 
(40)
 
 
 -
Present value of lease liabilities
 
 
305 
 
 
 -
Less: current obligations under leases
 
 
(146)
 
 
 -
Long-term lease obligations
 
$
159 
 
$
 -

 
 
 
 
 
 



9. LONG-TERM DEBT

Notes Payable

Note Payable to a Related Party
We have an unsecured promissory note payable of $0.8 million to Sterne, Kessler, Goldstein, & Fox, PLLC (“SKGF”), a related party (see Note 15), for outstanding unpaid fees for legal services The note, as amended, accrues interest at 4% per annum and provides for monthly payments of principal and interest of $10,000 with a final balloon payment of approximately $0.68 million due at the maturity date of April 30, 2022.   We are currently in compliance with all the terms of the note, as amended.  For the years ended December 31, 2020 and 2019, we recognized interest expense of approximately $0.03 million and $0.04 million, respectively, related to this note.

Unsecured Notes Payable 
Unsecured notes payable at December 31, 2020 represents the current portion of our Paycheck Protection Program loan, as described more fully below.  Unsecured notes payable at December 31, 2019 represents the outstanding principal balance of unsecured short-term promissory notes with accredited investors. The short-term promissory notes, as amended, accrued interest at a rate of 20% per annum.  During the year ended December 31, 2020, we issued an aggregate of 1,740,426 shares of our common stock as
 
 
 39 
 
 
 
an in-kind repayment of the $0.23 million in outstanding principal and $0.04 million of accrued interest on these short-term notes.  For the years ended December 31, 2020 and 2019, we recognized interest expense of approximately $0.01 million and $0.03 million, respectively, related to these short-term notes.

Paycheck Protection Program Loan
In May 2020, we received approximately $0.2 million in proceeds from an approved loan under the Paycheck Protection Program.  Interest accrues on the outstanding principal balance at a rate of 1%, computed on a simple interest basis.  The loan principal and accrued interest are expected to be eligible for forgiveness in accordance with the loan provisions.  Payments of principal and interest are deferred until the date a decision on an application for forgiveness is made.  If no application is submitted, we will be required to make monthly repayments of approximately $8,000 per month commencing May 1, 2021 and the loan will mature on May 3, 2022, at which time any unpaid principal and accrued interest will be due and payable.  We began the application process for loan forgiveness in March 2021.  The estimated current and noncurrent portions of this loan are included in the captions “Unsecured notes payable” and “Other long-term liabilities” in the consolidated balance sheet as of December 31, 2020.    
Other long-term liabilities at December 31, 2019 represents an advance payment from a potential litigation funder.  This liability was reclassified as an unsecured contingent payment obligation in 2020 (see “unsecured contingent payment obligation” below).

Secured Note Payable
We have a note payable to Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. (“Mintz”) for outstanding, unpaid attorney’s fees and costs associated with our patent enforcement program. The Mintz note is non-interest bearing, except in the event of a default, and is secured by certain of our U.S. and foreign patents. The note, at Mintz’s option, accelerates and becomes immediately due and payable in the case of standard events of default and/or in the event of a sale or other transfer of substantially all of our assets or a transfer of more than 50% of our capital stock in one or a series of transactions or through a merger or other similar transaction.

We were in default on the payment terms of the note at December 31, 2019, and accordingly, we accrued interest at the default rate of 12% per annum.  During the year ended December 31, 2020, we repaid $1.2 million of outstanding principal and interest on the Mintz note, leaving an outstanding balance of accrued default interest, at December 31, 2020 of approximately $0.03 million.  In March 2021, we settled our outstanding obligations with Mintz (see Note 17) and Mintz waived all past defaults on the note which has been paid in full.

At December 31, 2020, the aggregate maturities of our notes payable are as follows (in thousands):

 
 

 
 

 
 
2021
$
191 
2022
 
832 
Total
$
1,023 

 
 

The estimated fair value of our notes payable at December 31, 2020 is approximately $0.9 million based on a risk-adjusted discount rate.

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. Interest payments are made on a quarterly basis and are payable, at our option and subject to certain equity conditions, in either cash, shares of our
 
 
 40 
 
 
 
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 recognized the convertible notes as debt in our consolidated financial statements.  The fixed conversion prices of certain of the notes were below the market value of our common stock on the closing date resulting in the recognition of a beneficial conversion feature that is recorded as a discount on the convertible notes with a corresponding increase to additional paid in capital. 

Convertible notes payable at December 31, 2020 and 2019, consist of the following (in thousands):


 
 
 
 
 
 
 
 
 
 
 
 

 
 
 
 
 
 
 
 
 
 
 
 

 
Fixed
 
Effective
 
 
 
 
 
 
 
 

 
Conversion
 
Interest
 
 
 
December 31,
Description
 
Rate
 
Rate 1
 
Maturity Date
 
2020
 
2019
Convertible notes dated September 10, 2018
 
$0.40
 
23.4%
 
September 7, 2023
 
$
600 
 
$
700 
Convertible notes dated September 19, 2018
 
$0.57
 
10.2%
 
September 19, 2023
 
 
425