Company Quick10K Filing
ParkerVision
Price0.63 EPS-172
Shares0 P/E-0
MCap0 P/FCF-0
Net Debt3 EBIT-6
TEV3 TEV/EBIT-1
TTM 2019-09-30, in MM, except price, ratios
S-1 2020-04-21 Public Filing
10-Q 2020-03-31 Filed 2020-05-15
10-K 2019-12-31 Filed 2020-04-14
10-Q 2019-09-30 Filed 2019-11-14
S-1 2019-08-21 Public Filing
10-Q 2019-06-30 Filed 2019-08-14
S-1 2019-04-15 Public Filing
10-Q 2019-03-31 Filed 2019-05-15
10-K 2018-12-31 Filed 2019-04-01
S-1 2018-11-05 Public Filing
10-Q 2018-09-30 Filed 2018-11-14
S-1 2018-08-09 Public Filing
10-Q 2018-06-30 Filed 2018-08-14
10-Q 2018-03-31 Filed 2018-05-15
10-K 2017-12-31 Filed 2018-03-29
10-Q 2017-09-30 Filed 2017-11-14
10-Q 2017-06-30 Filed 2017-08-14
10-Q 2017-03-31 Filed 2017-05-15
10-K 2016-12-31 Filed 2017-03-30
10-Q 2016-09-30 Filed 2016-11-14
10-Q 2016-06-30 Filed 2016-08-15
10-Q 2016-03-31 Filed 2016-05-16
10-K 2015-12-31 Filed 2016-03-30
10-Q 2015-09-30 Filed 2015-11-09
10-Q 2015-06-30 Filed 2015-08-10
10-Q 2015-03-31 Filed 2015-05-11
10-K 2014-12-31 Filed 2015-03-16
10-Q 2014-09-30 Filed 2014-11-10
10-Q 2014-06-30 Filed 2014-08-11
10-Q 2014-03-31 Filed 2014-05-12
10-K 2013-12-31 Filed 2014-03-17
10-Q 2013-09-30 Filed 2013-11-12
10-Q 2013-06-30 Filed 2013-08-08
10-Q 2013-03-31 Filed 2013-05-09
10-K 2012-12-31 Filed 2013-03-18
10-Q 2012-09-30 Filed 2012-11-14
10-Q 2012-06-30 Filed 2012-08-14
10-Q 2012-03-31 Filed 2012-05-15
10-K 2011-12-31 Filed 2012-03-30
10-Q 2011-09-30 Filed 2011-11-14
10-Q 2011-06-30 Filed 2011-08-15
10-Q 2011-03-31 Filed 2011-05-16
10-K 2010-12-31 Filed 2011-03-31
10-Q 2010-09-30 Filed 2010-11-09
10-Q 2010-06-30 Filed 2010-08-05
10-Q 2010-03-31 Filed 2010-05-10
10-K 2009-12-31 Filed 2010-03-15
8-K 2020-06-29 Enter Agreement, Off-BS Arrangement, Sale of Shares, Exhibits
8-K 2020-06-08
8-K 2020-05-22
8-K 2020-05-15
8-K 2020-05-05
8-K 2020-04-14
8-K 2020-02-28
8-K 2020-02-09
8-K 2020-01-14
8-K 2020-01-08
8-K 2019-11-15
8-K 2019-11-14
8-K 2019-09-10
8-K 2019-08-14
8-K 2019-08-07
8-K 2019-07-18
8-K 2019-06-19
8-K 2019-06-07
8-K 2019-05-15
8-K 2019-04-29
8-K 2019-04-03
8-K 2019-03-07
8-K 2019-02-25
8-K 2018-12-21
8-K 2018-10-30
8-K 2018-09-20
8-K 2018-09-19
8-K 2018-09-11
8-K 2018-09-11
8-K 2018-08-23
8-K 2018-08-15
8-K 2018-07-26
8-K 2018-06-12
8-K 2018-04-27
8-K 2018-04-13
8-K 2018-04-05
8-K 2018-03-26
8-K 2018-03-23
8-K 2018-02-16

PRKR Filing

Part II
Item 13.Other Expenses of Issuance and Distribution
Item 14. Indemnification of Directors and Officers.
Item 15. Recent Sales of Unregistered Securities
Item 16. Exhibits and Financial Statements
Item 17. Undertakings
EX-5.1 prkr-20191231xex5_1.htm
EX-23.1 prkr-20191231xex23_1.htm
EX-23.2 prkr-20191231xex23_2.htm

ParkerVision Filing 2020-04-21

S-1 1 prkr-20191231xs1.htm S-1 S-1 Preliminary

As filed with the Securities and Exchange Commission on April 21, 2020



Registration No. 333-_______



UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

__________



FORM S-1

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

__________

PARKERVISION, INC.

(Exact name of registrant as specified in its charter)

__________



 

 



 

 

Florida

3663

59-2971472

(State or Other Jurisdiction of Incorporation)

(Primary Standard Industrial Classification Code Number)

(IRS Employer Identification No.)



9446 Philips Highway, Suite 5A

Jacksonville, Florida 32256

Phone: (904) 732-6100

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

__________

Jeffrey Parker, Chairman of the Board

ParkerVision, Inc.

9446 Philips Highway, Suite 5A

Jacksonville, Florida 32256

(904) 732-6100

(Name, address and telephone number, including area code, of agent for service)

__________

with a copy to:



David Alan Miller, Esq.

Graubard Miller

The Chrysler Building

405 Lexington Avenue - 11th floor

New York, NY 10174-1901

__________

Approximate date of commencement of proposed sale to the public: As soon as possible after the Registration Statement is declared effective.



If any of the securities being registered on this Form are to be offered on a delayed or continued basis pursuant to Rule 415 under the Securities Act of 1933 check the following box: ☒



If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐



If this form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration number of the earlier effective registration statement for the same offering. ☐



If this form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration number of the earlier effective registration statement for the same offering. ☐



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



 

 



 

 

Large accelerated filer ☐

 

Accelerated filer ☐

Non-accelerated filer ☒

 

Smaller reporting company ☒



 

Emerging growth company ☐


 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act. ☐



CALCULATION OF REGISTRATION FEE





 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

Title of Securities to be Registered

 

Amount to be Registered (9)

 

Proposed Maximum Offering Price Per Share (10)

 

Proposed Maximum Aggregate Offering Price

 

Amount of Registration Fee

 

Common Stock, par value $0.01 per share

 

500,000

(1)

 

$0.32

 

$                     160,000

 

$                    20.77

 

Common Stock, par value $0.01 per share

 

3,461,538

(2)

 

$0.32

 

$                  1,107,692

 

$                  143.78

 

Common Stock, par value $0.01 per share

 

1,000,000

(3)

 

$0.32

 

$                     320,000

 

$                    41.54

 

Common Stock, par value $0.01 per share

 

1,335,899

(4)

 

$0.32

 

$                     427,488

 

$                    55.49

 

Common Stock, par value $0.01 per share

 

2,571,432

(5)

 

$0.32

 

$                     822,858

 

$                  106.81

 

Common Stock, par value $0.01 per share

 

2,740,426

(6)

 

$0.32

 

$                     876,936

 

$                  113.83

 

Common Stock, par value $0.01 per share

 

5,000,000

(7)

 

$0.32

 

$                  1,600,000

 

$                  207.68

 

Common Stock, par value $0.01 per share

 

200,000

(8)

 

$0.32

 

$                       64,000

 

$                      8.31

 



 

 

 

 

 

 

 

 

 

 

Total

 

16,809,295

 

 

 

 

$                  5,378,974

 

$                  698.21

 



(1)

Represents shares of common stock, par value $0.01 per share (“Common Stock”) issuable pursuant to a convertible promissory note dated September 13, 2019 at a fixed conversion price of $0.10 per share (the “September 2019 Note”).

(2)

Represents shares of Common Stock issuable pursuant to convertible promissory notes dated January 8, 2020 at a fixed conversion price of $0.13 per share (the “January 2020 Notes”).

(3)

Represents shares of Common Stock that are issuable pursuant to any elections made by us to pay interest in shares of Common Stock on the September 2019 Note and the January 2020 Notes (collectively, the “Notes”), and assumes that each interest payment made through maturity will be paid in shares of Common Stock. The interest is payable at a rate of 8% of the outstanding principal balance per annum and interest payments will be made quarterly beginning on the earlier of (i) ninety (90) days following the issue date of the Convertible Notes provided a registration statement covering the shares of Common Stock has been declared effective or (ii) the first quarterly anniversary date following the effectiveness of a registration statement covering the shares of Common Stock. The price of the shares, if interest is paid in shares of Common Stock, will be determined based on the closing price of the Common Stock immediately prior to the interest payment date. For purposes of this Registration Statement, we have estimated this number based on the maximum interest payment amount divided by the closing price of our Common Stock on the OTCQB Venture Market (the “OTCQB”) on the date prior to the closing date of the January 2020 Notes, or a weighted average price of $0.20 per share.

(4)

Represents shares of Common Stock issued pursuant to securities purchase agreements dated January 9, 2020 and January 15, 2020 with the selling stockholders named herein. 

(5)

Represents shares of Common Stock issued pursuant to securities purchase agreements dated March 5, 2020 and March 13, 2020 with the selling stockholders named herein.

(6)

Represents shares of Common Stock issued as payment for services and as payment of principal and interest in satisfaction of short-term loans and other amounts payable to the selling stock holders named herein.

(7)

Represents shares of Common Stock issuable pursuant to a warrant agreement with Aspire Capital Fund, LLC (“Aspire”).

(8)

Represents shares of Common Stock issuable pursuant to a warrant agreement with Tailwinds Research Group LLC (“Tailwinds”).

(9)

Pursuant to Rule 416(a) of the Securities Act of 1933, as amended (the “Securities Act”), this Registration Statement also covers any additional shares of Common Stock which may become issuable to prevent dilution from stock splits, stock dividends and similar events.

(10)

Pursuant to Rule 457(c) of the Securities Act, this amount represents the average of the high and low prices of our Common Stock as reported on the OTCQB on April 17, 2020.

_______


 



The registrant hereby amends this Registration Statement on Form S-1 on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the registration statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.

 

The information in this preliminary prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.





SUBJECT TO COMPLETION, DATED APRIL 21, 2020



PROSPECTUS

PARKERVISION, INC.



16,809,295 Shares of Common Stock



This prospectus relates to the resale by the selling stockholders listed under the heading “Selling Stockholders” 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 are registering these shares of Common Stock as required by the terms of registration rights agreements between the selling stockholders and us. The registration of the shares of Common Stock offered by this prospectus does not mean that the selling stockholders will offer or sell any of these shares. The selling stockholders may offer the shares of Common Stock at prevailing market prices at the time of sale, at prices related to the prevailing market price, at varying prices determined at the time of sale, or at negotiated prices. See “Plan of Distribution” on page 36 for additional information.



We will not receive proceeds from the sale of the shares of Common Stock by the selling stockholders. To the extent the 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.



The selling stockholders may be deemed to be “underwriters” within the meaning of the Securities Act. We will pay the expenses of registering these shares of Common Stock, but all selling and other expenses incurred by the selling stockholders will be paid by the selling stockholders.



Our Common Stock is listed on the OTCQB Venture Capital Market under the ticker symbol “PRKR.”



You should read this prospectus and any prospectus supplement carefully before you invest in any of our securities.



Investing in our securities involves a high degree of risk. See “Risk Factors” beginning on page 6 of this prospectus for a discussion of information that should be considered in connection with an investment in our securities.



Neither the Securities and Exchange Commission nor any such authority has approved or disapproved these securities or determined whether this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.



The date of this prospectus is _____________, 2020.


 



TABLE OF CONTENTS





We have not, and the selling stockholders have not, authorized anyone to provide you with information different from that contained in this prospectus or in any supplement to this prospectus or free writing prospectus, and neither we nor the selling stockholders take any responsibility for any other information that others may give you. This prospectus is not an offer to sell, nor is it a solicitation of an offer to buy, the securities in any jurisdiction where the offer or sale is not permitted. You should not assume that the information contained in this prospectus or any prospectus supplement or free writing prospectus is accurate as of any date other than the date on the front cover of those documents, regardless of the time of delivery of this prospectus or any sale of a security. Our business, financial condition, results of operations and prospects may have changed since those dates.

 


 



SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS



Some of the statements in this prospectus are forward-looking statements that involve risks and uncertainties. These forward-looking statements include statements about our plans, objectives, expectations, intentions and assumptions, and all other statements that are not statements of historical fact. Words such as “may,” “will,” should,” “estimates,” “plans,” “expects,” “believes,” “intends” and similar expressions may identify forward-looking statements, but the absence of such words does not mean that a statement is not forward-looking. We cannot guarantee future results, levels of activity, performance or achievements. Our actual results and the timing of certain events may differ significantly from the results discussed in the forward-looking statements. Factors that might cause such a discrepancy include those discussed in “Our Company,” “Risk Factors,” and elsewhere in this prospectus and any prospectus supplements. You are cautioned not to place undue reliance on any forward-looking statements. We are under no duty to update or revise any of the forward-looking statements or risk factors to conform them to actual results or to changes in our expectations.

2


 

PROSPECTUS SUMMARY



This summary highlights certain selected information about us, this offering and the securities offered hereby. This summary is not complete and does not contain all of the information that you should consider before deciding whether to invest in our Common Stock. For a more complete understanding of our Company and this offering, we encourage you to read the entire prospectus, including the information presented under the section entitled “Risk Factors” and the financial data and related notes. Unless we specify otherwise, all references in this prospectus to “ParkerVision,” “we,” “our,” “us,” and “our company,” refer to ParkerVision, Inc. and its wholly-owned German subsidiary, ParkerVision GmbH.



Our Company



We were incorporated under the laws of the state of Florida on August 22, 1989. We are in the business of innovating fundamental wireless technologies and products. We have designed and developed proprietary radio frequency (“RF”) technologies and integrated circuits for use in wireless communication products. We have expended significant financial and other resources to research and develop our RF technologies and to obtain patent protection for those technologies in the United States of America (“U.S.”) and certain foreign jurisdictions. We believe certain patents protecting our proprietary technologies have been broadly infringed by others and therefore our business plan includes enforcement of our intellectual property rights through patent infringement litigation and licensing efforts. We currently have patent enforcement actions ongoing in various U.S. district courts against mobile handset providers and their chip suppliers for the infringement of a number of our RF patents. We have also designed and developed a consumer distributed WiFi product line that is marketed under the brand name Milo®. We restructured our operations during the third quarter of 2018 in order to reduce operating expenses in light of our limited capital resources.  Accordingly, we significantly reduced our ongoing investment in the Milo product and ceased our integrated circuit development efforts.  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. 



Our business address is 9446 Philips Highway, Suite 5A, Jacksonville, Florida 32256 and our telephone number is (904) 732-6100. We maintain a website at www.parkervision.com. We have not incorporated by reference into this prospectus the information on our website, and you should not consider it to be a part of this prospectus.



Background of the Offering



Convertible Notes

On September 13, 2019, we sold a $50,000 convertible promissory note with a fixed conversion price of $0.10 per share to an accredited investor.  On January 8, 2020, we sold an aggregate of $450,000 in convertible promissory notes with a fixed conversion price of $0.13 per share to accredited investors.   The notes mature five years from the date of issuance and are convertible, at the holders’ option, into shares of our Common Stock at their respective fixed conversion prices. The notes bear interest at a stated rate of 8% per annum. Interest is payable quarterly, and we may elect, subject to certain equity conditions, to pay interest in cash, shares of our Common Stock, or a combination thereof.



The Company entered into a registration rights agreement with the purchasers of the January 2020 Notes, pursuant to which the Company committed to file a resale registration statement by the 120th calendar day following the issuance date of the January 2020 Notes and to cause the registration statement to become effective by the 180th calendar day following the issuance date. The registration rights agreement provides for liquidated damages upon the occurrence of certain events including failure by the Company 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%. The Company did not enter into a registration rights agreement with respect to the September 2019 Notes.



Sale of Common Stock

In January 2020, we sold an aggregate of (i) 1,169,232 shares of our Common Stock at a purchase price of $0.13 per share and (ii) 166,667 shares of our Common Stock at a purchase price of $0.15 per share in private placement transactions with accredited investors for aggregate proceeds of approximately $177,000.   In March 2020, we sold an aggregate of 2,571,432 shares of our Common Stock at a purchase price of $0.35 per share in a private placement transaction with accredited investors for aggregate proceeds of approximately $900,000.



The Company also entered into registration rights agreements with each of the purchasers of Common Stock. The Company committed to file and cause a resale registration statement to become effective within a certain amount of time following the issuance of the shares, described more fully in the section titled “The Private Placements”. The registration rights agreements provide for liquidated damages upon the occurrence of certain events including failure by the Company to file the registration statement or cause it to become effective by the respective deadlines. 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%.





3


 

Repayment of Outstanding Obligations

We issued an aggregate of 2,740,426 shares of our Common Stock in January and February 2020 as payment for services and repayment of outstanding obligations including (i) 214,000 shares as repayment of approximately $28,000 in principal and accrued interest on a June 2019 unsecured promissory note, (ii) 500,000 shares as repayment of approximately $75,000 in outstanding amounts payable to a related party,   (iii) 1,526,426 shares as repayment of approximately $237,000 in principal and accrued interest on a May 2019 unsecured promissory note, and (iv) 500,000 shares as payment of a retainer valued at $150,000 for services provided under an 18-month consulting agreement with Chelsea Investor Relations (“Chelsea”). 



Issuance of Warrants

On February 28, 2020, we entered into a warrant amendment agreement (“Warrant Amendment Agreement”) with Aspire Capital Fund, LLC (“Aspire”) with respect to warrants issued to Aspire in July and September 2018 that were exercisable, collectively, into 5,000,000 shares of our Common Stock (the “2018 Warrants”).  The Warrant Amendment Agreement provides for a reduction in the exercise price for the 2018 Warrants from $0.74 to $0.35 per share and the issuance of a new warrant for the purchase of 5,000,000 shares of our Common Stock at an exercise price of $0.74 per share (the “New Aspire Warrant”).  The New Aspire Warrant expires five years from the date of issuance. On March 16, 2020, we issued Tailwinds Research Group LLC (“Tailwinds”) a warrant for the purchase of up to 200,000 shares of our Common Stock at an exercise price of $1.00 per share in connection with a digital marketing services agreement.  The Tailwinds warrant expires three years from date of issuance.



The Offering





 



 

Common Stock being offered

by the selling stockholders (1)

16,809,295 shares including (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 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 with Tailwinds Research Group LLC (“Tailwinds”).

Common Stock outstanding prior to the Offering

43,102,745 shares as of April 17, 2020 (2)

Common Stock outstanding  after the Offering

53,264,283 (3)

Terms of Offering

The selling stockholders will determine when and how they will sell the Common Stock offered hereby, as described in “Plan of Distribution” beginning on page 36.

Use of proceeds

The selling stockholders will receive all of the proceeds from the sale of the shares offered under this prospectus. We will not receive proceeds from the sale of the shares by the selling stockholders. However, to the extent the 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 the proceeds from the exercise of the Aspire and Tailwinds warrant, if any, for working capital and corporate purposes.

OTCQB Symbol

PRKR

Risk Factors

Investing in our securities involves a high degree of risk. You should carefully review and consider the “Risk Factors” section of this prospectus for a discussion of factors to consider before deciding to invest in shares of our Common Stock.



(1)

Assumes conversion of the Notes in full at their respective maturity dates at the fixed conversion prices per share,  assumes that interest paid through maturity will be paid in shares of Common Stock at an average price per share of $0.20, and assumes the Aspire and Tailwinds warrants are exercised in full.



(2)

This amount includes (i) an aggregate of 3,907,331 shares of Common Stock issued pursuant to securities purchase agreements in January and March 2020, which shares are being registered hereby and (ii) 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, which shares are being registered hereby.  This amount does not include:

4


 

·

Unvested restricted stock units (RSUs) and options for the purchase of up to 12,927,524 additional shares of Common Stock;

·

Warrants to purchase up to 15,920,000 additional shares of Common Stock, including the 5,200,000 shares  issuable upon exercise of the Aspire and Tailwinds warrants  registered hereby;

·

Up to 23,807,152 shares of Common Stock issuable upon the conversion of the outstanding principal amount of our convertible promissory notes, including the 3,961,538 shares underlying the principal amounts of the Notes registered hereby;

·

Up to an estimated 8,034,501 additional shares of Common Stock issuable upon the payment in shares of interest on outstanding convertible promissory notes, including the 1,000,000 estimated interest shares for the Notes registered hereby; and

·

294,600 shares of Common Stock that have been reserved for issuance in connection with future grants under our long-term equity incentive plans.



(3)

This amount includes the estimated 4,961,538 shares issuable upon conversion of, and for the payment of interest from time to time at our option on, the Notes and all 5,200,000 shares issuable upon exercise of the Aspire and Tailwinds warrants



5


 



RISK FACTORS



You should carefully consider the risks and uncertainties described below. The risks and uncertainties described below are not the only ones facing us. Additional risks not presently known to us or that we currently believe are immaterial may also impair our business operations. Our business, financial condition or results of operation could be materially adversely affected by any of these risks. The trading price of our Common Stock could decline because of any one of these risks, and you may lose all or part of your investment.



Financial and Operating Risks



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



We have had significant losses and negative cash flows in every year since inception, and continue to have an accumulated deficit which, at December 31, 2019, was approximately $401.8 million. Our net losses for the years ended December 31, 2019 and 2018 were approximately $9.5 million and $20.9 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, 2019, a statement with respect to substantial doubt about our ability to continue as a going concern.  Note 2 to our consolidated financial statements included elsewhere in this prospectus 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 efforts. Those efforts may not produce a successful financial outcome in 2020, or at all.  Without a successful financial outcome from one or more of our patent enforcement efforts, we will not achieve profitability.  Furthermore, our current capital resources are not sufficient to sustain our operations through 2020.  If we are not able to generate sufficient revenues or obtain sufficient capital resources, we will not be able to implement our business plan or meet our current obligations due within the twelve months after the issuance date of our consolidated financial statements and investors will suffer a loss in their investment. This may also result in a change in our business strategies.

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



Because we have had net losses and, to date, have not generated positive cash flow from operations, we have funded our operating losses primarily from the sale of debt and equity securities, including our secured contingent debt obligation.  Our capital resources include cash and cash equivalents of $0.06 million at December 31, 2019 and proceeds of approximately $2.1 million received during the first quarter of 2020 from various debt and equity transactions.   Although we implemented significant cost reduction measures in 2018 and 2019, our business plan will continue to require expenditures for patent protection and enforcement and general operations. For the years ended December 31, 2019 and 2018, we used $3.4 million and $10.3 million, respectively in cash for operations which was funded primarily through the sale of convertible debt and equity securities. Our current capital resources will not be sufficient to meet our working capital needs for the twelve months after the issuance of our consolidated financial statements and we will require additional capital to fund our operations. Additional capital may be in the form of debt securities, the sale of equity securities, including common or preferred stock, additional litigation funding, or a combination thereof. Failure to raise additional capital will have a material adverse impact on our ability to achieve our business objectives.

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



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



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



We have $2.3 million in secured and unsecured notes payable and $3.6 million in outstanding principal under convertible notes payable at December 31, 2019 and we have an additional $0.5 million in outstanding principal under convertible notes issued in the first quarter of 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 $335.1 million at December 31, 2019, of which $314.8 million is subject to expiration in varying amounts from 2020 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. The sale of additional equity securities may trigger an ownership change under Section 382 which will significantly limit our ability to utilize our tax benefits.  In order to avoid limitations imposed by Section 382, we may be limited in the amount of additional equity securities we are able to sell to raise capital. 



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



We have funded much of our cost of litigation through contingent financing arrangements with Brickell and 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 others could exceed half of our future proceeds depending on size and timing of proceeds, among other factors. The long-term continuation of our business plan is dependent upon our ability to secure sufficient financing to support our business, and our ability to generate revenues and/or patent related proceeds sufficient to offset expenses and meet our contingent payment obligation.  Failure to generate revenue or other patent-related proceeds sufficient to repay our contingent obligation may impede our ability to obtain additional financing which will have a material adverse effect on our ability to achieve our long-term business objectives.



Our litigation can be time-consuming, costly and we cannot anticipate the results.



Since 2011, we have spent a significant amount of our financial and management resources to pursue patent infringement litigation against third parties. We believe this litigation, and other litigation matters that we may in the future determine to pursue, 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. We have contingent fee arrangements in place with others to reduce our litigation related expenditures; however any litigation-based or other patent-related amounts collected by us will be subject to contingency payments to our legal counsel and other funding parties which will reduce the amount retained by us.



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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 is expected to negatively impact the timing of our current patent infringement actions as a result of office closures, travel restrictions and court closures.  For example, each of our patent infringement cases in Florida have motions pending or granted for the extension of certain court deadlines due to the impact of COVID-19.  



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 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.



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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.



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, 2019, we had 34.1 million shares of common stock outstanding and had outstanding options and warrants for the purchase of up to 23.6 million additional shares of common stock, of which approximately 15.6 million were exercisable as of December 31, 2019.  In addition, as described more fully below, holders of convertible notes may elect to receive a substantial number of shares of common stock upon conversion of the notes and we may elect to pay accrued interest on the notes in shares of our common stock.  All of the shares of common stock underlying these securities are or will be registered for sale to the holder or for public resale by the holder.  The amount of common stock reserved for issuance may have an adverse impact on our ability to raise capital and may affect the price and liquidity of our common stock in the public market. In addition, the issuance of these shares of common stock will have a dilutive effect on current stockholders’ ownership.



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



We have aggregate principal of $3.6 million in convertible notes outstanding at December 31, 2019. The notes are convertible into shares of our common stock at fixed conversion prices, which may be less than the market price of our common stock at the time of conversion. If the entire principal is converted into shares of common stock, we would be required to issue an aggregate of up to 20.8 million shares of common stock. In addition, in the first quarter of 2020, we issued an additional aggregate principal amount of $0.5 million in convertible notes which, if converted at the fixed conversion price, would result in the issuance of an additional 3.5 million shares of our common stock.  If we issue all of these shares, the ownership of our current stockholders will be diluted.



Further, we may elect to pay interest on the notes, 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 1.9 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.



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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, 2018 and December 31, 2019, the reported high and low sales prices for our common stock ranged between $0.06 and $1.25 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 was delisted from the Nasdaq Capital Market and is now quoted on OTCQB, an over-the-counter market. There can be no assurance that our common stock will continue to trade on the OTCQB or on another over-the-counter market or securities exchange.



Trading of our common stock on the Nasdaq Capital Market was suspended effective at the open of business on August 17, 2018 as a result of our failure to maintain at least $35 million in market value of listed securities. Our common stock began trading on the OTCQB, an over-the-counter market, immediately following delisting from Nasdaq, under the symbol “PRKR”. The over-the-counter market is a significantly more limited market than Nasdaq, and the quotation of our common stock on the over-the-counter market may result in a less liquid market available for existing and potential stockholders to trade shares of our common stock. Securities traded in the over-the-counter market generally have less liquidity due to factors such as the reduced number of investors that will consider investing in the securities, the reduced number of market makers in the securities, and the reduced number of securities analysts that follow such securities. As a result, holders of shares of our common stock may find it difficult to resell their shares at prices quoted in the market or at all. We may be subject to additional compliance requirements under applicable state laws relating to the issuance of our securities. This could have a long-term adverse effect on our ability to raise capital, which ultimately could adversely affect the market price of our common stock. Delisting could also have other negative results, including the potential loss of confidence by employees, the loss of institutional investor interest and fewer business development opportunities. We cannot provide any assurances as to if or when we will be in a position to relist our common stock on a nationally-recognized securities exchange.



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



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



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



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



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



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



We have a shareholder protection rights plan that may delay or discourage someone from making an offer to purchase 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, 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.



Sales of substantial amounts of our Common Stock by the selling stockholders, or the perception that these sales could occur, could adversely affect the price of our Common Stock.



The sale by the selling stockholders of a significant number of shares of Common Stock, or the perception in the public markets that these sales will occur, could have a material adverse effect on the market price of our Common Stock.



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USE OF PROCEEDS



The selling stockholders will receive all of the proceeds from the sale of the shares of Common Stock offered under this prospectus. We will not receive proceeds from the sale of the shares by the selling stockholders. However, to the extent the 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 the proceeds from the exercise of the Aspire and Tailwinds warrants, if any, for working capital and corporate purposes.

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THE PRIVATE PLACEMENTS



Convertible Note Transactions



On September 13, 2019, we entered into a securities purchase agreement for the sale of a convertible promissory note for proceeds of $50,000 with an accredited investor (the “September 2019 Note”).  The principal and unpaid interest accrued on the September 2019 Note is convertible into shares of our Common Stock at a fixed conversion price of $0.10 per share.  Any unconverted outstanding principal and unpaid interest accrued on the September 2019 Note is payable in cash on September 13, 2024.    



At any time following the one-year anniversary of the issuance date, we may prepay the then outstanding principal amount of the September 2019 Note, along with any unpaid accrued interest (the “Prepayment Amount”) upon thirty days’ written notice. The holder will have the right within twenty days to convert all or a portion of the Prepayment Amount into shares of Common Stock at the fixed conversion price. Any Prepayment Amount paid in cash will include a premium of 25% prior to the two-year anniversary of the date such note was issued, 20% prior to the three-year anniversary of the date such note was issued, 15% prior to the four-year anniversary of the date such note was issued, or 10% thereafter.



On January 8, 2020, we entered into securities purchase agreements for the sale of convertible promissory notes for aggregate proceeds of $450,000 with accredited investors (the “January 2020 Notes”).  The principal and unpaid interest accrued on the January 2020 Notes is convertible into shares of our Common Stock at a fixed conversion price of $0.13 per share.   Any unconverted outstanding principal and unpaid interest accrued on the January 2020 Notes is payable in cash on the January 8, 2025 (the “Maturity Date”), except that the Maturity Date will be automatically extended by one-year increments for an aggregate of up to ten years, unless the holder, at the holder’s sole option, revokes the automatic extensionThe January 2020 Notes may not be prepaid by us.



Interest of 8% per annum is payable on the September 2019 Note and the January 2020 Notes (collectively, the “Notes”) in quarterly installments beginning on the first three-month anniversary of the issuance date following the effectiveness of the registration statement related thereto    The interest rate on the January 2020 Notes decreases to 2% per annum if the Maturity Date extends beyond January 8, 2025.  The holders of the January 2020 Notes have the option to defer each interest payment for a period of six months.  Interest on the Notes may be paid, at our option, subject to certain equity conditions, in either (i) cash, (ii) shares of Common Stock, or (iii) a combination of cash and shares of Common Stock. If we elect to pay accrued interest in shares of Common Stock, the price per share will be determined by the then-market price of the Common Stock, which may be less than the stated conversion price of the Notes. 



The Notes provide for events of default that include (i) failure to pay principal or interest when due, (ii) any breach of any of the representations, warranties, covenants or agreements made by us in the securities purchase agreements or Notes, (iii) events of liquidation or bankruptcy, and (iv) a change in control. In the event of default, the interest rate increases to 12% per annum and the outstanding principal balance of the Notes plus all accrued interest due may be declared immediately payable by the holders of a majority of the then outstanding principal balance of the Notes.



We also entered into a  registration rights agreement with the holders of the January 2020 Notes pursuant to which we agreed to register the shares of Common Stock underlying the Notes. We committed to file a registration statement within 120 calendar days of the issuance date of the Notes and to cause the registration statement to become effective within 180 calendar days following the closing date (or within 210 calendar days in the event of a full review of the registration statement by the SEC). The registration rights agreement provides for liquidated damages upon the occurrence of certain events including failure by us to file the registration statement or cause it to become effective by the deadlines set forth above. The amount of the liquidated damages is 1.0% of the aggregate subscription amount paid by the holders for the January 2020 Notes upon the occurrence of the event, and monthly thereafter, up to a maximum of 6%, or approximately $27,000.  The Company did not enter into a registration rights agreement with the holder of the September 2019 Note.



Sale of Common Stock



On January 9, 2020, we entered into securities purchase agreements with accredited investors for an aggregate of 1,169,232 shares of our Common Stock at a price of $0.13 per share On January 15, 2020, we entered into a securities purchase agreement with an accredited investor for 166,667 shares of our Common Stock at $0.15 per share.  We received aggregate proceeds from the January 9, 2020 and January 15, 2020 transactions (collectively, the “January 2020 PIPE”) of $177,000. On March 5, 2020 and March 13, 2020,  we entered into securities purchase agreements with accredited investors for an aggregate of 2,571,432 shares of our Common Stock at a price of $0.35 per share (collectively, the “March 2020 PIPE”).  We received aggregate proceeds from the March 2020 PIPE of $900,000.



We entered into a registration rights agreements in connection with the January 2020 PIPE and the March 2020 PIPE pursuant to which we agreed to register the shares of Common Stock.  We committed to file a registration statement within 60-120 calendar days of the transaction date and to cause the registration statement to become effective within 120-180 calendar days following the closing date (or within 180-210 calendar days in the event of a full review of the registration statement by the SEC). The registration  rights

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agreements provide for liquidated damages upon the occurrence of certain events including failure by us to file the registration statement or cause it to become effective by the deadlines set forth above. The amount of the liquidated damages is 1.0% of the aggregate subscription amount held by the accredited investors upon the occurrence of the event, and monthly thereafter, up to a maximum of 6%, or approximately $64,000.



Repayment of Outstanding Obligations and Payment for Services



On January 9, 2020, we issued 214,000 shares of our Common stock as repayment in-kind of approximately $28,000 in principal and interest, pursuant to a promissory note with Mark Fisher dated June 7, 2019, as amended (the “Fisher Note”).   The Fisher Note was an unsecured, short-term note with an original maturity at the early of ninety (90) days following the issuance date or upon our receipt of additional litigation financing and an interest rate of 18% per annum.  In September 2019, the Fisher Note was amended to extend the maturity date to December 2019 and increase the interest rate to 20% per annum. 



On January 15, 2020, we issued 500,000 shares of our Common Stock as repayment of approximately $75,000 in outstanding accounts payable to Stacie Wilf, a related party.  The amounts were payable as a result of funds advanced by Ms. Wilf for sales support and advertising costs for our Milo product in 2019. 



On February 10, 2020, we entered into a business consulting and retention agreement with Chelsea Investor Relations (“Chelsea”) to provide business advisory services to us.  As consideration for services to be provided under the 24-month term of the consulting agreement, we issued 500,000 shares of unregistered Common Stock in exchange for a nonrefundable retainer for services valued at approximately $150,000.   



On February 28, 2020, we issued 1,526,426 shares of our Common Stock as repayment in-kind of approximately $237,000 in principal and accrued interest pursuant to a promissory note with a the Thomas Staz Revocable Trust dated May 15, 2019, as amended (the “Staz Note”). The Staz Note was an unsecured, short-term note with an original maturity at the early of ninety (90) days following the issuance date or upon our receipt of additional litigation financing and an interest rate of 18% per annum.  In August 2019, the Staz Note was amended to extend the maturity date to September 2019 and increase the interest rate to 20% per annum.  In September 2019, the Staz Note was further amended to extend the maturity date to December 2019.  The Staz Note was repaid in Common Stock at an average conversion price of approximately $0.16 per share.

 

Warrants



On February 28, 2020, we entered into a warrant amendment agreement (the “Warrant Amendment Agreement”) with Aspire Capital Fund, LLC (“Aspire”), with respect to warrants issued in July and September 2018 (the “2018 Warrants”) that are exercisable, collectively, into 5,000,000 shares of our Common Stock.   The Warrant Amendment Agreement provided for a reduction in the exercise price for the 2018 Warrants from $0.74 to $0.35 per share and the issuance of a new warrant for the purchase of 5,000,000 shares of our Common Stock at an exercise price of $0.74 per share (“New Aspire Warrant”).   The New Aspire Warrant expires February 28, 2025 and is subject to adjustment in the event of certain stock dividends and distributions, stock splits, stock combinations, reclassifications or similar events affecting our Common Stock and also upon any distributions of assets to our stockholders.  The New Aspire Warrant contains provisions that prohibit exercise if the holder, together with its affiliates, would beneficially own in excess of 9.99% of the number of shares of Common Stock outstanding immediately after giving effect to such exercise. The holder of the New Aspire Warrant may increase (up to 19.99%) or decrease this percentage by providing at least 61 days’ prior notice to the Company. In the event of certain corporate transactions, the holder of the New Aspire Warrant will be entitled to receive, upon exercise of such New Aspire Warrant, the kind and amount of securities, cash or other property that the holder would have received had they exercised the New Aspire Warrant immediately prior to such transaction. The New Aspire Warrant does not contain voting rights or any of the other rights or privileges as a holder of our Common Stock.  

We have agreed to include the New Aspire Warrant in this registration statement as permissible and necessary to register under the Exchange Act the resale by Aspire of the shares of Common stock underlying the New Aspire Warrant.  The shares underlying the 2018 Warrants are currently registered pursuant to a registration statement on Form S-1 (File No. 333-226738).  The Warrant Amendment Agreement added a call provision to the 2018 Warrants whereby we may, after December 31, 2020, call for cancellation of all or any portion of the 2018 Warrants for which an exercise notice has not yet been received, in exchange for consideration equal to $0.001 per warrant share and subject to certain conditions, including the continued existence of an effective registration statement for the underlying shares of Common Stock and the availability of sufficient authorized shares to allow for the exercise of the 2018 Warrants.  All other terms of the 2018 Warrants remained unchanged, including the original expiration dates of July and September 2023.  In connection with the Warrant Amendment Agreement, Aspire exercised 1,430,000 shares of the 2018 Warrants for aggregate proceeds to us of $500,500.



On March 16, 2020, we entered into an agreement with Tailwinds Research Group LLC (“Tailwinds”) to provide digital marketing services to us.  As consideration for services to be provided under the twelve-month term of the agreement, we issued warrants for the purchase up to 200,000 shares of our Common Stock with an exercise price of $1.00 per share. The Tailwinds warrants are exercisable immediately after issuance, expire March 16, 2023, and are subject to adjustment in the event of certain stock dividends and distributions, stock splits, stock combinations, reclassifications or similar events affecting our Common Stock.    

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MARKET PRICE OF OUR COMMON STOCK AND RELATED STOCKHOLDER MATTERS



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 6, 2020, we had approximately 72 holders of record and we believe there are approximately 7,700 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.



Equity Plan Information



The following table gives information as of December 31, 2019 about shares of our common stock authorized for issuance under all of our equity compensation plans (in thousands, except for per share amounts):



 

 

 



 

 

 



 

 

 

Plan Category

Number of securities to
be issued upon exercise
of outstanding options,
warrants and rights

Weighted-average
exercise price of
outstanding options,
warrants and rights

Number of securities
remaining available for
future issuance under
equity compensation plans
(excluding securities
reflected in column (a))



(a)

 

(c)

Equity compensation plans approved by security holders (1)

860  $2.23  609 

Equity compensation plans not approved by security holders (2)

10,550  0.17  1,450 

Total

11,410 

 

2,059 

 

 

 

 



1.

Includes the 2000 Performance Equity Plan, the 2008 Equity Incentive Plan, and the 2011 Long-Term Incentive Equity Plan.  The types of awards that may be issued under each of these plans is discussed more fully in Note 14 to our audited consolidated financial statements included elsewhere in this prospectus.



2.

Includes the 2019 Long-Term Incentive Plan. The types of awards that may be issued under each of these plans is discussed more fully in Note 14 to our audited consolidated financial statements included elsewhere in this prospectus.



 



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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS



Executive Overview



We are in the business of innovating fundamental wireless technologies and products.  We have designed and developed proprietary RF technologies and integrated circuits for use in wireless communication products. We have expended significant financial and other resources to research and develop our RF technologies and to obtain patent protection for those technologies in the U.S. and certain foreign jurisdictions.  We believe certain patents protecting our proprietary technologies have been broadly infringed by others and therefore our business plan primarily consists of enforcement of our intellectual property rights through patent infringement litigation and licensing efforts.  We have also designed and developed a consumer distributed WiFi product line that was marketed under the brand name Milo. 



In August 2018, we implemented cost reduction measures that included a significant reduction in our workforce, the closure of our engineering design center in Lake Mary, Florida and a reduction in executive and management salaries in order to reduce our ongoing operating expenses.  As a result of these measures, we ceased ongoing chip development activities and significantly curtailed our spending for development, sales and marketing of our Milo product line in order to focus our limited resources on our patent enforcement program, which requires a significant investment over a lengthy period of time.  We ceased sales of our Milo products during the fourth quarter of 2019 in order to focus solely on patent enforcement actions.



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 elsewhere in this prospectus 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. 



Liquidity and Capital Resources



At December 31, 2019, we had a working capital deficit of approximately $5.5 million, an increase from our working capital deficit of $2.1 million at December 31, 2018.  We had cash and cash equivalents totaling approximately $0.06 million at December 31, 2019. 



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, 2019, we incurred a net loss of approximately $9.5 million and had an accumulated deficit of approximately $401.8 million.  Our independent registered public accounting firm has included in their audit report an explanatory paragraph expressing substantial doubt about our ability to continue as a going concern.  See Note 2 to our consolidated financial statements included elsewhere in this prospectus for a discussion of our liquidity and our ability to continue as a going concern.



Our use of cash for operations has declined 67%, from $10.3 million in 2018 to $3.4 million in 2019.  This decrease in cash usage is primarily the result of decreased operating expenses following a restructuring of our operations in the third quarter of 2018.   Although our cash used for operations declined from 2018 to 2019, so did our receipt of proceeds from the sale of debt and equity securities which we utilize to fund our operations.  We received net proceeds of approximately $3.1 million from equity and debt financings in 2019, compared to $10.6 million received in 2018.  The decline in financing proceeds is largely a result of reduced liquidity in our common stock following our delisting from Nasdaq in August 2018 and declining share price.  In addition, we used $1.2 million in cash to repay outstanding debt obligations in 2019, compared to the use of $0.1 million for debt repayments in 2018.



At December 31, 2019, we had approximately $1.5 million in debt obligations due to be repaid in 2020, a decrease from $2.4 million in current debt obligations at December 31, 2018.  The decrease in our short-term debt repayment obligations is primarily the result of $1.2 million in repayments under a secured promissory note, offset by new borrowings under unsecured short-term notes payable of $0.2 million.  See “Financial Condition” below for a complete discussion of the terms of our notes payable. 



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. 



In the first quarter of 2020, we received net proceeds of approximately $1.6 million from the sale of equity securities and convertible notes and $0.5 million from the exercise of warrants.  In addition, we received $0.6 million in advances from a potential litigation funding party.  These proceeds are being used to fund our ongoing operations, including litigation costs.



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A significant portion of our litigation costs in 2018 and 2019 have been funded by contingent payment arrangements with legal counsel and a litigation funding arrangement with Brickell.  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. 



In addition to contingent fee arrangements with legal counsel, since 2016, we have received an aggregate of $18 million in funds from Brickell under a contingent funding arrangement.  We account for our repayment obligation to Brickell as a long-term debt instrument recorded at its estimated fair value.  See “Financial Condition” below for a complete discussion of our obligation to Brickell.  At December 31, 2019, our aggregate repayment obligation to Brickell was recorded at its estimated fair value of $26.7 million.  Brickell is entitled to a priority prorated payment of at least 55% of proceeds received by us from funded patent-related actions up to a specified minimum return.   Brickell’s minimum return varies based on a number of factors including whether the proceeds are a result of a contingently-funded action, the magnitude, nature and timing of the proceeds received, and the contingent percentage agreed to between the parties.



Although current working capital will not be used to repay these contingent arrangements, based on our current outstanding legal proceedings, funding arrangements and contingent payment arrangements, we estimate that 40% to 65% of future proceeds could be payable to others depending on the proceeding and the nature, size 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 2020, 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 $2.9 million and $3.9 million as of December 31, 2019 and 2018, 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 $0.6 million in patent amortization expense recognized in 2019 as our portfolio matures and a $0.4 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, 2019 and 2018, we incurred losses of approximately $0.4 million and $0.1 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.



Secured Contingent Payment Obligation

Our secured contingent payment obligation to Brickell was recorded at its estimated fair value of $26.7 million and $25.6 million as of December 31, 2019 and 2018, respectively.   Under the funding agreement, Brickell has a right to reimbursement and compensation from gross proceeds resulting from patent enforcement and other patent monetization actions on a priority basis.  Our repayment obligation to Brickell is contingent upon receipt of proceeds from our patents and the amount of our obligation varies based on the magnitude, timing and nature of proceeds received by us.  As a result, we have elected to account for this obligation at its estimated fair value which is subject to significant estimates and assumptions as discussed in “Critical Accounting Policies” below.  The $1.1 million increase in estimated fair value of this repayment obligation in 2019 is primarily the result of (i) increases in the minimum return due to Brickell the longer the obligation remains outstanding and (ii) changes in our estimated probabilities for the timing and amount of future repayments to Brickell.  Refer to Note 10 to our consolidated financial statements included elsewhere in this prospectus for a discussion of the fair value measurement of our contingent payment obligation.



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Brickell is entitled to a priority payment of patent-related proceeds up to at least a specified minimum return which is determined as a percentage of the funded amount and varies based on the timing of repayment.  In addition, Brickell is entitled to a pro rata portion of proceeds from specified legal actions to the extent aggregate proceeds from those actions exceed the specified minimum return.  In the event of a change in control of the Company, Brickell has the right to be paid its return as defined under the agreement based on the transaction price for the change in control event.



Brickell holds a senior security interest in the majority of our assets until such time as the specified minimum return is paid, in which case, the security interest will be released except with respect to the patents and proceeds related to specific legal actions.  The security interest is enforceable by Brickell in the event that we are in default under the agreement.  We are currently in compliance with the provisions of the agreement.



We received no proceeds from Brickell in 2019.  In 2018, we received aggregate proceeds of $4.0 million from Brickell including proceeds of $2.5 million received in December 2018.  The December 2018 funding was critical to meet our ongoing obligations, particularly with regard to our litigation fees and expenses and therefore, in connection with the transaction, we issued Brickell a warrant to purchase up to 5.0 million shares of our common stock at an exercise price of $0.16 per share.  As the estimated fair value of the payment obligation to Brickell resulting from this additional funding exceeded the $2.5 million in proceeds received, no value was assigned to the warrants.



Notes Payable

As of December 31, 2019, we had approximately $2.3 million in notes payable, including an unsecured promissory note payable to Sterne, Kessler, Goldstein, & Fox, PLLC (“SKGF”), a related party, of approximately $0.9 million, a secured promissory note payable to Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. (“Mintz”) of $1.2 million, and short-term bridge loans from accredited investors of approximately $0.2 million.  The short-term bridge loans were repaid in the first quarter of 2020 with shares of our common stock (see Note 18). 



Failure to comply with the payment terms of each of these notes constitutes an event of default which, if uncured, will result in the entire unpaid principal balance of the note and any unpaid, accrued interest to become immediately due and payable.  In addition, an event of default results in an increase in the interest rate under the SKGF and Mintz notes to a default rate of 12% per annum.  As of December 31, 2019, we are in default of the payment provisions of the secured note payable to Mintz and we are in dispute with Mintz regarding fees billed.  We are actively working with Mintz to resolve the dispute and cure any default.  There can be no assurance that we will be successful in curing our default on the Mintz note.



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, 2019, we had net deferred tax assets of approximately $96 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 elsewhere in this prospectus.



Results of Operations for Each of the Years Ended December 31, 2019 and 2018



Revenues and Gross Margins



We reported no licensing revenue for the years ended December 31, 2019 or 2018.  Although we do anticipate licensing revenue and/or settlement gains to result from our licensing and patent enforcement actions, the amount and timing is highly unpredictable and there can be no assurance that we will achieve our anticipated results. 



We reported product revenue of $0.07 million and $0.14 million for the years ended December 31, 2019 and 2018, respectively, from the sales of our Milo-branded products.  Our product revenue declined due to overall reductions in development, sales and marketing for these products following our 2018 restructuring. 



The gross margins on Milo product sales, before inventory impairment charges, were approximately 1% and 24% for the years ended December 31, 2019 and 2018, respectively.  The decrease in gross margin is the result of sales price adjustments in 2019.  Our revenues from Milo products fell short of our projections and we had limited resources to deploy towards increasing consumer awareness of our products.  As a result, we made the decision to discontinue sales of Milo products during the fourth quarter of 2019.  Additionally, during the year ended December 31, 2018, we recorded $1.1 million in impairment charges to reduce excess inventories to their estimated net realizable value.

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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.



Research and development costs were approximately $0.3 million for the year ended December 31, 2019 compared to approximately $2.9 million for the year ended December 31, 2018, representing a decrease of approximately $2.6 million, or 90%.  This decrease is primarily the result of a $1.3 million decrease in personnel and related costs, a $0.3 million decrease in consulting fees, and a $0.1 million decrease in software licensing and support costs.  Additionally, research and development expenses decreased approximately $0.6 million due to personnel and related costs being repurposed for selling, general and administrative purposes including litigation support and Milo sales and support.



The decreases in personnel and software and licensing are a result of the August 2018 restructuring of operations which included a significant workforce reduction, reduction in engineering executive compensation, and closure of the Lake Mary engineering design facility.  The reduction in outside consulting services is the result of cost reduction efforts pertaining to our Milo product operations and integrated circuit development following our 2018 restructuring. 



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 $7.6 million for the year ended December 31, 2019, as compared to approximately $10.4 million for the year ended December 31, 2018, representing a decrease of approximately $2.8 million or 27%.  This is primarily due to a $0.9 million decrease in personnel and related expense, including a decrease in share-based compensation expense of approximately $0.2 million, a decrease in Milo product advertising costs of approximately $0.6 million, a decrease in marketing and other business consulting and legal fees of approximately $0.7 million, a decrease in noncash amortization expense of approximately $0.4 million, a decrease in board compensation of approximately $0.2 million and a decrease in travel expenses and shareholder relations costs of approximately $0.1 million each.  These decreases are somewhat offset by an increase in losses on disposals of patent and other long-lived assets of approximately $0.3 million.



The decrease in personnel costs is primarily the result of the reduction in personnel and executive compensation as part of our 2018 restructuring, somewhat offset by the repurposing of technical personnel for litigation support commencing in the second quarter of 2019. Share-based compensation expense decreased primarily as a result of lower grant-date fair values on newer awards due to declining stock prices when compared to prior year awards.



The decreases in product advertising and marketing, consulting and legal fees, board compensation, shareholder relations costs and travel expenses are a result of our cost reduction measures that commenced in 2018.  The decrease in noncash amortization expense is the result of the expiration and/or abandonment of a number of our patents and patent applications since the third quarter of 2018.

 

Restructuring Charges



We incurred approximately $0.7 million in restructuring charges in 2018.  These charges are a result of the implementation of cost reduction measures in August 2018 that included a significant reduction in our workforce, the closure of our engineering design center in Lake Mary, Florida, the cessation of ongoing chip development activities, and a significant reduction in our spending for sales and marketing of our Milo product line.  These measures were undertaken in order to focus our limited resources toward our patent enforcement program which, if successful, has the ability to generate significant licensing and/or settlement revenue.  The restructuring charges were primarily related to one-time termination benefits, the impairment of prepaid assets, and our estimated future lease obligation for our Lake Mary, Florida facility, net of estimated sublease income.  At December 31, 2018, we recorded an estimated lease obligation for our Lake Mary facility of approximately $0.2 million which is net of an estimated $0.4 million in future sublease rental income.  To date, we have not sublet this facility.  We are actively marketing the Lake Mary facility for sublease, however there can be no assurance that our efforts will be successful.  If we are unable to sublet our Lake Mary facility for the rental amount or term that we have estimated, we will incur additional impairment charges related to this lease obligation. 

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The 2018 cost reduction measures have resulted in significant cost savings in 2019.



Change in Fair Value of Contingent Payment Obligation



Our losses from the changes in fair value of our contingent payment obligation were approximately $1.1 million and $5.7 million for the years ended December 31, 2019 and 2018, respectively.  See “Financial Condition” above for a discussion of our contingent payment obligation and the factors impacting the change in fair value. 



Critical Accounting Policies



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



Inventory

Inventory is stated at the lower of actual cost, as determined under the first-in, first-out method, or estimated net realizable value.  We review our inventory for estimated obsolescence or unmarketable inventory and write down inventory for the difference between cost and estimated market value based upon assumptions about future demand.  Future demand is affected by market conditions, technological obsolescence, new products and strategic plans, each of which is subject to change. 



Secured Contingent Payment Obligation

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



Accounting for Share-Based Compensation

We calculate the fair value of share-based equity awards to employees, including restricted stock, stock options and restricted stock units (“RSUs”), on the date of grant and recognize the calculated fair value as compensation expense over the requisite service periods of the related awards. The fair value of stock option awards is determined using the Black-Scholes option valuation model which requires the use of highly subjective assumptions and estimates including how long employees will retain their stock options before exercising them and the volatility of our common stock price over the expected life of the equity award.  Changes in these subjective assumptions can materially affect the estimate of fair value of share-based compensation and consequently, the related amount recognized as expense in the consolidated statements of comprehensive loss. 



New Accounting Pronouncements

As of January 1, 2019, we adopted Accounting Standards Codification (“ASC”) 842, “Leases.” ASC 842 requires lessees to recognize right-of-use (“ROU”) assets and lease liabilities on the balance sheet for all finance and operating leases with lease terms of more than 12 months and disclose key information about leasing arrangements (see Note 8). ASC 842 allows for the application of the new standard on the adoption date without restatement of prior comparative periods or a modified retrospective transition method which requires application of the new standard at the beginning of the earliest period presented. We have elected to use the adoption date as the initial application date without restatement of prior comparative periods. We also elected the package of practical expedients permitted under the transition guidance which, among other things, does not require us to reassess lease classification. Upon adoption of ASC 842, we recognized an adjustment to beginning retained earnings of approximately $0.04 million for the cumulative effect of the change in accounting principle. We also recorded a ROU asset of approximately $0.56 million and an increase in our operating lease liabilities of approximately $0.60 million, primarily related to operating leases for our office and warehouse facilities. Our accounting for finance leases remains substantially unchanged. Adoption of the standard did not materially impact operating results or cash flows.

 

As of January 1, 2019, we adopted Accounting Standards Update (“ASU”) 2018-02, “Income Statement - Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income.” The amendments in this update allow a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act. We have no stranded tax effects included in our other comprehensive loss and therefore the adoption of ASU 2018-02 did not impact our consolidated financial statements.



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As of January 1, 2019, we adopted ASU 2018-07, "Compensation - Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting." The amendments in this update simplify the accounting for share-based payments to nonemployees by aligning it with the accounting for share-based payments to employees, with certain exceptions. We did not previously have awards to nonemployees that would require reassessment and therefore the adoption of ASU 2018-07 did not impact our consolidated financial statements.



Off-Balance Sheet Transactions



As of December 31, 2019, we had outstanding warrants to purchase 12.2 million shares of our common stock.  The estimated grant date fair value of these warrants of approximately $1.3 million is included in shareholders’ deficit in our consolidated balance sheet for the year ended December 31, 2019.  The outstanding warrants have an average exercise price of $0.44 per share and a weighted average remaining life of approximately 4 years. 



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DESCRIPTION OF BUSINESS



We were incorporated under the laws of the state of Florida on August 22, 1989. We are in the business of innovating fundamental wireless technologies and products. We have designed and developed proprietary radio frequency (“RF”) technologies and integrated circuits for use in wireless communication products. We have also designed and developed a consumer distributed WiFi product line that is marketed under the brand name Milo®.



We have expended significant financial and other resources to research and develop our RF technologies and to obtain patent protection for those technologies in the United States of America (“U.S.”) and certain foreign jurisdictions. We believe certain patents protecting our proprietary technologies have been broadly infringed by others and therefore our business plan includes enforcement of our intellectual property rights through patent infringement litigation and licensing efforts. We currently have patent enforcement actions ongoing in various U.S. district courts against mobile handset providers and their chip suppliers for the infringement of a number of our RF patents.



We restructured our operations during the third quarter of 2018 in order to reduce operating expenses in light of our limited capital resources.  Accordingly, we significantly reduced our ongoing investment in the Milo product and ceased our integrated circuit development efforts.  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. 



General Development of Business



Our business has been primarily focused on the development, marketing and licensing of our RF technologies for mobile and other wireless products and applications, including our own internally developed end-user wireless products. For a number of years, we marketed our RF technologies and integrated circuit products for use in mobile products and applications. Our lack of tenure in the mobile handset industry coupled with the unique nature of our technology resulted in lengthy and intense technology evaluation and due diligence efforts by potential customers. Furthermore, in order to utilize our technology in a mobile handset application, we were reliant upon the provider of the baseband processor that generates the data to be transmitted or received by our RF chipsets. Although our technology is capable of interfacing with any baseband processor, the development of the interface between the baseband processor and our chipset requires a cooperative effort with the baseband provider. Accordingly, our marketing efforts were dependent on the activities of third parties. In 2011, through analysis of conference papers and tear down reports, we concluded that Qualcomm’s products were infringing our energy transfer sampling down conversion technology. Based on our belief that our technology is widely-deployed in the mobile handset market as a result of infringement of our patents, we began to more vigorously pursue an intellectual property licensing strategy which included enforcement actions.



From 2014 through 2017, we pursued licensing opportunities for our technologies, including through additional litigation where we deemed necessary to protect our patent rights. In addition to our patent enforcement activities, from 2013 through 2017, we also designed and developed products that included integrated circuits (“ICs”) based on our proprietary technologies as well end-user WiFi products aimed at the home and small business networking market. These product development efforts culminated in the launch of our Milo brand product line, which began selling in October 2017.



During the first half of 2018, we focused on (i) production, sales and marketing, and continued developments and enhancements of our WiFi products; (ii) ongoing integrated circuit development for future products and (iii) supporting our patent enforcement and licensing efforts. Our WiFi products did not produce the revenue growth that we had anticipated in 2018 and we also experienced lengthy delays in proceedings in certain of our patent enforcement efforts.



In addition, trading of our common stock on the Capital Market of The Nasdaq Stock Market LLC (“Nasdaq”) was suspended effective at the open of business on August 17, 2018 as a result of our failure to maintain at least $35 million in market value of listed securities. Our common stock began trading on the OTCQB, an over-the-counter market, immediately following delisting from Nasdaq and our trading symbol, “PRKR”, remained unchanged. We intend to remain a public reporting company and we plan to continue to maintain a majority of independent members on our Board with an independent Audit Committee and to provide annual financial statements audited by an independent registered public accounting firm and unaudited interim financial statements prepared in accordance with accounting principles generally accepted in the U.S. However, the OTCQB is a significantly more limited market than Nasdaq.



These factors contributed to a lack of liquidity which necessitated a change in our business plans. Accordingly, in August 2018, we implemented cost reduction measures that included a significant reduction in our workforce, the closure of our engineering design center in Lake Mary, Florida and a reduction in executive and management salaries in order to reduce our ongoing operating expenses. As a result of these measures, we ceased ongoing chip development activities and significantly curtailed our spending for development, sales and marketing of our WiFi product line in order to focus our limited resources on our patent enforcement program 

23


 

which requires a significant investment over a lengthy period of time.  We ceased sales of our Milo products during the fourth quarter of 2019 in order to focus solely on our patent enforcement actions.



From a patent enforcement standpoint, we spent much of 2018 defending our patents in validity actions filed by defendants in our patent infringement proceedings in both the U.S. and Germany.  In October 2018, we received an adverse decision in Germany regarding the validity of one of our patents which was the subject of two infringement proceedings in Germany.  In 2019, we received an adverse decision in our third German patent infringement case which we opted not to appeal, thus ending our infringement actions in Germany. 



In 2018, we also received a final decision in a validity challenge filed by Qualcomm against patents that are the subject of a case against Qualcomm and HTC in the middle district of Florida (Orlando division).  This final decision upheld certain favorable patent claims and ultimately resulted in the stay being lifted in the infringement case in early 2019.  In July 2019, the district court denied Qualcomm’s request to limit the claims and patents in the case and also agreed that we may elect to pursue accused products that were at issue at the time the case was stayed, as well as new products that were released by Qualcomm during the pendency of the stay. The trial is scheduled to begin in December 2020 for this case.



In addition, in July 2019 the district court in the Middle District of Florida (Jacksonville division) issued its claim construction order in our infringement case against Apple and Qualcomm which has been pending since an August 2018 claim construction hearing. The court’s claim construction order adopted our proposed construction for two of the six disputed terms and the “plain and ordinary meaning” on the remaining terms. In addition, the court denied Apple’s motion for summary judgement. This case is scheduled for trial in August 2020.



Currently the Florida cases have temporary stays in place due to COVID-19 which may impact one or more of the trial schedules.   See Note 12 to our consolidated financial statements for the year ended December 31, 2019 included elsewhere in this prospectus for a detailed description of our various patent enforcement actions.



A significant portion of our litigation costs are funded under a secured contingent payment arrangement with Brickell Key Investments LP (“Brickell”) and other contingent arrangements with our legal counsel. In 2018, we funded our operations, including litigation costs, with $4.0 million in additional proceeds received from Brickell and through the sale of approximately $5.3 million in equity and equity-linked securities and $1.3 million in convertible debt.  In 2019, we funded our operations primarily with the sale of approximately $2.4 million in convertible debt and through contingent arrangements with legal counsel.  See “Management’s Discussion and Analysis of Financial Condition and Results of Operations” elsewhere in this prospectus for a full discussion of our litigation funding arrangements and our equity and debt financings.



Milo WiFi Products



Our Milo-branded WiFi products were produced and sold 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. 



Our Milo products did not generate the revenue growth that we anticipated in 2018, in part due to our lack of sufficient financial resources to establish brand recognition and expand sales channels.  Accordingly, as part of our restructuring in August 2018, we made significant reductions in our product sales, marketing, development and operations staff  as well as our expenditures for advertising and other marketing promotions, causing sales to further decline.  In the fourth quarter of 2019, we ceased sales of our Milo products.   



The components for the production of our Milo products were generally purchased from third-party suppliers, including contract manufacturers, on a purchase order basis.  To mitigate supply risk, and based on long lead-times and anticipated consumer demand, we built up a significant Milo component and finished product inventory.   As a result, in connection with our restructuring in August 2018, we ceased production and recognized impairment charges against our on-hand inventories. 



Our Milo products competed with WiFi networking products offered by companies such as Google, Belkin/Linksys, D-Link, NetGear, Eero (purchased by Amazon), and others.  We also faced competition from service providers who bundle competing networking devices with their service offering.  Although we believe our products were able to compete based on performance, ease-of-installation, price and customer support, our competitors have substantially greater financial resources and brand awareness that we believe were significant factors in the lack of success of our product line. 



24


 

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 and sales and marketing resources.  We believe we can gain adoption and/or secure licensing agreements with unauthorized current users of one or more of our technologies, and therefore compete, based on a solid and defensible patent portfolio and the advantages enabled by our unique circuit architectures. 



Patents and Trademarks



We consider our intellectual property, including patents, patent applications, trademarks, and trade secrets to be significant to our 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, 2019, we had approximately 130 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 2020 to 2036. 



Employees



As of December 31, 2019, we had 10 full-time and 2 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.



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. 



Properties



Our headquarters are located in a 3,000 square foot leased facility in Jacksonville, Florida.  We have an additional 7,000 square foot leased facility in Lake Mary, Florida that was primarily for engineering design activities.  As a result of our restructuring in August 2018, we have ceased use of the Lake Mary facility and are attempting to sublease the facility for the remaining lease term.  We believe our properties are in good condition and suitable for the conduct of our business.  Refer to Note 8 to our consolidated financial statements included elsewhere in this prospectus for information regarding our outstanding lease obligations.



Legal Proceedings



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



25


 



DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE



Directors

Our Board is divided into three classes with only one class of directors typically being elected in each year and each class serving a three-year term.  In April 2019, Mr. Lewis Titterton resigned from our Board due to family medical issues. Mr. Titterton’s resignation was not due to any disagreement with us on any matter relating to our operations, policies, or practices, financial or otherwise.  Our current directors, including their backgrounds and qualifications are as follows:  





 

 

 

 



 

 

 

 

Name

 

Age

 

Position with the Company

Frank N. Newman

 

77

 

Class II Director, Audit Committee Member

Jeffrey L. Parker

 

63

 

Class I Director, Chairman of the Board and Chief Executive Officer

Paul A. Rosenbaum

 

77

 

Class III Director, Audit Committee Chair

Robert G. Sterne

 

68

 

Class III Director

 

 

 

 

 



Frank N. Newman

Frank Newman has been a director of ours since December 2016.  Mr. Newman has served since 2011 as chairman of Promontory Financial Group China Ltd., an advisory group for financial institutions and corporations in China.  From 2005 to 2010, he served as chairman and chief executive officer of Shenzhen Development Bank, a national bank in China.  Prior to 2005, Mr. Newman served as chairman, president, and chief executive officer of Bankers Trust and chief financial officer of Bank of America and Wells Fargo Bank.  Mr. Newman served as Deputy Secretary of the U.S. Treasury from 1994 to 1995 and as Under Secretary of Domestic Finance from 1993 to 1994.  He has authored two books and several articles on economic matters, published in the U.S., mainland China, and Hong Kong.  Mr. Newman has served as a director for major public companies in the U.S., United Kingdom, and China, and as a member of the Board of Trustees of Carnegie Hall. He earned his BA, magna cum laude, in economics at Harvard.  Mr. Newman brings a substantial knowledge of international banking and business relationships to the Board.  His financial background adds an important expertise to the Board with regard to financing future business opportunities. 



Jeffrey L. Parker

Jeffrey Parker has been the Chairman of our Board and our Chief Executive Officer since our inception in August 1989 and was our president from April 1993 to June 1998. From March 1983 to August 1989, Mr. Parker served as executive vice president for Parker Electronics, Inc., a joint venture partner with Carrier Corporation performing research, development, manufacturing, and sales and marketing for the heating, ventilation and air conditioning industry. Mr. Parker is a named inventor on 31 U.S. patents. Among other qualifications, as Chief Executive Officer, Mr. Parker has relevant insight into our operations, our industry, and related risks as well as experience bringing disruptive technologies to market.



Paul A. Rosenbaum

Paul A. Rosenbaum has been a director of ours since December 2016 and a member of our Audit Committee since September 2018.  Mr. Rosenbaum has extensive experience as a director and executive officer for both public and private companies in a number of industries.  Since 1994, Mr. Rosenbaum has served as chief executive of SWR Corporation, a privately-held corporation that designs, sells, and markets specialty industrial chemicals.  In September 2017, Mr. Rosenbaum was appointed to the Board of Commissioners for the Oregon Liquor Control Commission and has served as chairman since March 2018. Since 2009, Mr. Rosenbaum has been a member of the Providence St. Vincent Medical Foundation Council of Trustees, and previously served as president of the Council.  In addition, from September 2000 until June 2009, Mr. Rosenbaum served as chairman and chief executive officer of Rentrak Corporation (“Rentrak”), a Nasdaq publicly traded company that provides transactional media measurement and analytical services to the entertainment and media industry.  From June 2009 until July 2011, Mr. Rosenbaum served in a non-executive capacity as chairman of Rentrack.  From 2007 until 2016, Mr. Rosenbaum served on the Board of Commissioners for the Port of Portland, including as vice chairman from 2012 to 2016.  Mr. Rosenbaum was chief partner in the Rosenbaum Law Center from 1978 to 2000 and served in the Michigan Legislature from 1972 to 1978, during which time he chaired the Michigan House Judiciary Committee, was legal counsel to the Speaker of the House of the state of Michigan and wrote and sponsored the Michigan Administrative Procedures Act. Additionally, Mr. Rosenbaum served on the National Conference of Commissioners on Uniform State Laws, as vice chairman of the Criminal Justice and Consumer Affairs Committee of the National Conference of State Legislatures, and on a committee of the Michigan Supreme Court responsible for reviewing local court rules.  Among other qualifications, Mr. Rosenbaum has extensive experience as a director and executive officer of a publicly held corporation and has relevant insights into operations and our litigation strategies.



26


 

Robert G. Sterne

Robert Sterne has been a director of ours since September 2006 and also served as a director of ours from February 2000 to June 2003. Since 1978, Mr. Sterne has been a partner of the law firm of Sterne, Kessler, Goldstein & Fox PLLC, specializing in patent and other intellectual property law. Mr. Sterne provides legal services to us as one of our patent and intellectual property attorneys.  Mr. Sterne has co-authored numerous publications related to patent litigation strategies.  He has received multiple awards for contributions to intellectual property law including Law 360’s 2016 Top 25 Icons of IP and the Financial Times 2015 Top 10 Legal Innovators in North America.  Among other qualifications, Mr. Sterne has an in-depth knowledge of our intellectual property portfolio and patent strategies and is considered a leader in best practices and board responsibilities concerning intellectual property.



Director Independence

Although our Common Stock is quoted on the OTCQB, we continue to follow the rules of Nasdaq in determining if a director is independent. The Board also consults with our counsel to ensure that the Board’s determination is consistent with those rules and all relevant securities and other laws and regulations regarding the independence of directors. The Board has affirmatively determined that Messrs. Newman, Rosenbaum, and Sterne are independent directors.



Information About Our Executive Officers



Our current executive officers are as follows:  



 

 

 

 



 

 

 

 



 

 

 

 

Name

 

Age

 

Position with the Company

Jeffrey Parker

 

63

 

Chairman of the Board and Chief Executive Officer (“CEO”)

Cynthia Poehlman

 

53

 

Chief Financial Officer and Corporate Secretary (“CFO”)

 

 

 

 

 



The background for Mr. Jeffrey Parker is included above under the heading “Directors”.



Cynthia Poehlman

Cynthia Poehlman has been our chief financial officer since June 2004 and our corporate secretary since August 2007.  From March 1994 to June 2004, Ms. Poehlman was our controller and our chief accounting officer.  Ms. Poehlman has been a certified public accountant in the state of Florida since 1989.



Former Executive Officers

Messrs. David Sorrells and Gregory Rawlins both served as our Chief Technology Officers (“CTO”) through 2019. In March 2020, given our reduced scope of operations, in particular our research and development activities, our Board determined to eliminate the Chief Technology Officer role.  Both Mr. Sorrells and Mr. Rawlins remain employed by us in technical support roles.



Family Relationships



There are no family relationships among our officers or directors.



27


 



EXECUTIVE COMPENSATION



Summary Compensation Table



The following table summarizes the total compensation of each of our “named executive officers” as defined in Item 402(m) of Regulation S-K (the “Executives”) for the fiscal years ended December 31, 2019 and 2018. Given the complexity of disclosure requirements concerning executive compensation, and in particular with respect to the standards of financial accounting and reporting related to equity compensation, there is a difference between the compensation that is reported in this table versus that which is actually paid to and received by the Executives. The amounts in the Summary Compensation Table that reflect the full grant date fair value of an equity award, do not necessarily correspond to the actual value that has been realized or will be realized in the future with respect to these awards.





 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(a)

(b)

 

(c)

 

(d)

 

(e)

 

(f)

 

(g)

 

(h)

Name and Principal Position

Year

 

Salary
($)

 

Bonus ($)

 

Stock Awards
($)(1)

 

Option Awards
($)(1)

 

All Other
($)

 

Total
($)

Jeffrey Parker, CEO

2019

 

$

260,000

 

$

 -

 

$

 -

 

$

845,766

 

$

24,000

5

$

1,129,766



2018

 

 

297,500

 

 

 -

 

 

 -

 

 

 -

 

 

24,000

5

 

321,500

Cynthia Poehlman, CFO

2019

 

 

180,000

 

 

 -

 

 

 -

 

 

140,961

 

 

 -

 

 

320,961



2018

 

 

205,962

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

205,962

David Sorrells, CTO

2019

 

 

158,577

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

158,577



2018

 

 

252,303

2

 

2,149

 

 

 -

 

 

 -

 

 

 -

 

 

254,452

John Stuckey, CMO 3

2019

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -



2018

 

 

175,696

 

 

 -

 

 

 -

 

 

 -

 

 

7,692

3

 

183,388

Gregory Rawlins, CTO Heathrow

2019

 

 

200,000

 

 

 -

 

 

 -

 

 

105,721

 

 

 -

 

 

305,721



2018

 

 

228,846

4

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

228,846

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



1.

The amounts represented in columns (e) and (f) represents the full grant date fair value of equity awards in accordance with ASC 718.  Refer to Note 14 to the consolidated financial statements for the year ended December 31, 2019 included elsewhere in this prospectus for the assumptions made in the valuation of equity awards.

2.

Includes $8,481 which represents the grant-date fair value of restricted stock received by the executive in lieu of salary.

3.

Mr. Stuckey’s employment was terminated in August 2018.  The amount reported in column (g) represents amounts paid in connection with termination of executive’s employment, including $7,215 which represents the grant-date fair value of restricted stock received by the executive in lieu of cash.

4.

Includes $7,692 which represents the grant-date fair value of restricted stock received by the executive in lieu of salary.

5.

Represents an automobile allowance in the amount of $24,000.



In August 2018, each of our Executives agreed to a 20% reduction in base salary in connection with our planned restructuring.  Mr. Sorrells agreed to an additional reduction in base salary in March 2019. In consideration of our Executive’s voluntary salary reductions, in February 2020, our Board approved equity awards under our 2019 Long Term Incentive Plan including 300,000 RSUs to Mr. Parker, 150,000 RSUs to each of Messrs. Rawlins and Sorrells and 150,000 share options at an exercise price of $0.31 per share to Ms. Poehlman.  Refer to Note 18 to our consolidated financial statements for the year ended December 31, 2019 included elsewhere in this prospectus for the terms of the equity awards.



We do not have employment agreements with any of our Executives. We have non-compete arrangements in place with all of our employees, including our Executives, that impose post-termination restrictions on (i) employment or consultation with competing companies or customers, (ii) recruiting or hiring employees for a competing company, and (iii) soliciting or accepting business from our customers. We also have a tax-qualified defined contribution 401(k) plan for all of our employees, including our Executives. We did not make any employer contributions to the 401(k) plan in 2019 or 2018.

28


 

Outstanding Equity Awards at Fiscal Year End



The following table summarizes information concerning the outstanding equity awards, including unexercised options, unvested stock and equity incentive awards, as of December 31, 2019 for each of our Executives:





 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 



 

Option Awards



 

Number of
securities
underlying
unexercised
options
(#)
exercisable

 

Number of
securities
underlying
unexercised
options
(#)
unexercisable

Option
Exercise
Price
($)

 

Option
Expiration
Date

 

Name

 

(a)

 

(b)

(c)

 

(d)

 

Jeffrey Parker

 

20,000 

 

 -

 

1.98 

 

8/15/2024

 



 

1,500,000 

 

4,500,000 

 

0.17 

 

8/7/2029

 

Cynthia Poehlman

 

20,000 

 

 -

 

1.98 

 

8/15/2024

 



 

250,000 

 

750,000 

 

0.17 

 

8/7/2029

 

David Sorrells

 

20,000 

 

 -

 

1.98 

 

8/15/2024

 

Gregory Rawlins

 

20,000 

 

 -

 

1.98 

 

8/15/2024

 



 

187,500 

 

562,500 

 

0.17 

 

8/7/2029

 

 

 

 

 

 

 

 

 

 

 



Director Compensation



Following our Board restructuring in September 2018, the Board eliminated all cash fees for Board and committee service.  Our non-employee directors receive equity compensation, generally annually, in the form of nonqualified stock options or RSUs.  In 2018, each of our non-employee directors received 125,000 nonqualified share options, vesting over a one-year period, with an exercise price of $0.60 per share for and a grant-date fair value of approximately $58,000.  In 2019, each of our non-employee directors received 800,000 nonqualified share options, vesting over a two-year period, with an exercise price of $0.17 per share and a grant-date fair value of approximately $113,000.  Any unvested share-based awards to non-employee directors are forfeited if the director resigns or is removed from the Board for cause.



We reimburse our non-employee directors for their reasonable expenses incurred in attending meetings and we encourage participation in relevant educational programs for which we reimburse all or a portion of the costs incurred for these purposes.



Directors who are also our employees are not compensated for serving on our Board.

29


 



The following table summarizes the compensation of our current and former non-employee directors for the year ended December 31, 2019.



 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

Name

 

Fees Earned or Paid in Cash

($) 1

 

Stock

Awards($)

 

Option

Awards($) 2

 

Total
($)

(a)

 

(b)

 

(c)

 

(d)

 

(e)

Frank Newman 3

 

 

 -

 

 

 -

 

$

112,769 

 

$

112,769 

Paul Rosenbaum 3

 

 

 -

 

 

 -

 

 

112,769 

 

 

112,769 

Robert Sterne 4

 

 

 -

 

 

 -

 

 

112,769 

 

 

112,769 

 

 

 

 

 

 

 

 

 

 

 

 

1.

Following our Board restructuring in September 2018, the Board eliminated all cash fees for Board and committee service.  

2.

The amounts represented in column (d) represent the full grant date fair value of share-based awards in accordance with ASC 718.  Refer to Note 14 of the consolidated financial statements included elsewhere in this prospectus for the assumptions made in the valuation of stock awards.

3.

At December 31, 2019, Messrs. Newman and Rosenbaum each have an aggregate of 975,000 nonqualified stock options outstanding, of which 375,000 are exercisable.

4.

At December 31, 2019, Mr. Sterne has 1,029,046 nonqualified stock options outstanding, of which 429,046 are exercisable.



30


 

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT



The following table sets forth certain information as of March 30, 2020 with respect to the stock ownership of (i) those persons or groups who beneficially own more than 5% of our common stock, (ii) each of our directors, (iii) each of our executive officers, and (iv) all of our directors and executive officers as a group (based upon information furnished by those persons).



As of March 30, 2020, 43,102,745 shares of our common stock were issued and outstanding.





 

 

 

 



 

 

 

 



 

 

 

 

Name of Beneficial Owner

 

Amount and
Nature of
Beneficial
Ownership

 

Percent
of Class1

EXECUTIVE OFFICERS AND DIRECTORS

 

 

 

 

Jeffrey Parker 8

 

2,697,270 

2

5.9% 

Cynthia Poehlman 8

 

538,943 

3

1.2% 

Frank Newman 8

 

621,250 

4

1.4% 

Paul Rosenbaum 8

 

1,328,194 

5

3.0% 

Robert Sterne 8

 

771,061 

6

1.8% 

All directors, director nominees and executive officers as a group (5 persons)

 

5,956,718 

7

12.4% 

 

 

 

 

 



1

Percentage is calculated based on all outstanding shares of common stock plus, for each person or group, any shares of common stock that the person or the group has the right to acquire within 60 days pursuant to options, warrants, conversion privileges or other rights.  Unless otherwise indicated, each person or group has sole voting and dispositive power over all such shares of common stock.

2

Includes 2,270,000 shares of common stock issuable upon currently exercisable options, 150,000 RSUs that will vest within 60 days, 153,324 shares held by Mr. Parker directly, 117,259 shares held by Jeffrey Parker and Deborah Parker Joint Tenants in Common, over which Mr. Parker has shared voting and dispositive power, and 6,687 shares owned of record by Mr. Parker’s child over which he disclaims ownership.  Excludes 3,750,000 shares of common stock issuable upon options that may become exercisable in the future and 150,000 shares of common stock underlying unvested RSUs.

3

Includes 488,750 shares of common stock issuable upon currently exercisable options and excludes 681,250 shares of common stock issuable upon options that may become exercisable in the future.

4

Includes 475,000 shares of common stock issuable upon currently exercisable options and 18,750 RSUs that will vest within 60 days and excludes 500,000 shares of common stock issuable upon options that may become exercisable in the future and 56,250 RSUs that may vest in the future.

5

Includes 568,750 shares of common stock issuable upon currently exercisable options and 250,000 shares of common stock issuable upon conversion of convertible notes.  Excludes 556,250 shares of common stock issuable upon options that may become exercisable in the future.

6

Includes 722,796 shares of common stock issuable upon currently exercisable options and excludes 556,250 shares of common stock issuable upon options that may become exercisable in the future.

7

Includes 4,525,296 shares of common stock issuable upon currently exercisable options, 168,750 RSUs that will vest within 60 days, and 250,000 shares of common stock issuable upon conversion of convertible notes held by directors and officers and excludes 6,043,750 shares of common stock issuable upon options that may become exercisable in the future and 206,250 RSUs that may vest in the future (see notes 2, 3, 4, 5, and 6 above).

8

The person’s address is 9446 Philips Highway, Suite 5A, Jacksonville, Florida 32256.



31


 

CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS



We paid approximately $22,000 and $30,000 in 2019 and 2018, respectively for patent-related legal services to SKGF, of which Robert Sterne, is a partner.  In addition, we paid approximately $59,000 in 2018 for principal and interest on an unsecured note payable to SKGF.  The note was issued in 2016 to convert outstanding unpaid legal fees to an unsecured promissory note.  The note was amended multiple times in 2018 and 2019 to defer principal payments.  The note, as amended, allows for interest at 4% per annum, monthly installments of $10,000 per month beginning January 2020, with a final balloon payment due on April 30, 2022.  At December 31, 2019, the outstanding balance of the note, including unpaid interest is $879,000.



On September 10, 2018, we sold an aggregate of $400,000 in promissory notes, convertible into shares of our common stock at a fixed conversion price of $0.40 to related parties on the same terms as other convertible notes sold in the same transaction.  Jeffrey Parker, our chief executive officer and chairman of the Board, Paul Rosenbaum and Lewis Titterton, two of our non-employee directors, each purchased a convertible note with a face value of $100,000.  In addition, Stacie Wilf, sister to Jeffrey Parker, purchased a convertible note with a face value of $100,000.



On March 26, 2018 three of our directors purchased an aggregate of approximately 200,000 shares of our common stock in an unregistered sale of equity securities at a purchase price of $0.83 per share, which represented the closing bid price of our common stock on the purchase date.  In February 2017, one of our directors, Mr. Paul Rosenbaum, purchased 80,510 shares of our common stock in an unregistered sale of equity securities at a purchase price of $2.11 per share, which represented the closing bid price of our common stock on the purchase date.





32


 

SELLING STOCKHOLDERS



This prospectus relates to the offer and sale by the selling stockholders from time to time of up to an aggregate of 16,809,295 shares including (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 with 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 with Tailwinds.



When we refer to the “selling stockholders” in this prospectus, we mean the persons and entities listed in the table below, and each of their respective pledgees, donees, permitted transferees, assignees, successors and others who later come to hold any of such selling stockholder’s interests in shares of our Common Stock other than through a public sale.



Other than as described in this prospectus, the selling stockholders have not within the past three years had any position, office or other material relationship with us or any of our predecessors or affiliates other than as a holder of our securities. None of the selling stockholders are broker-dealers or affiliates of a broker-dealer.



The table below presents information regarding the selling stockholders, the shares of Common Stock that they may sell or otherwise dispose of from time to time under this prospectus and the number of shares and percentage of our outstanding shares of Common Stock each of the selling stockholders will own assuming all of the shares covered by this prospectus are sold by the selling stockholders.



We do not know when or in what amounts the selling stockholders may sell or otherwise dispose of the shares of Common Stock offered hereby. The selling stockholders might not sell or dispose of any or all of the shares covered by this prospectus or may sell or dispose of some or all of the shares other than pursuant to this prospectus. Because the selling stockholders may not sell or otherwise dispose of some or all of the shares covered by this prospectus and because there are currently no agreements, arrangements or understandings with respect to the sale or other disposition of any of the shares, we cannot estimate the number of shares that will be held by the selling stockholders after completion of the offering. However, for purposes of this table, we have assumed that all of the shares of Common Stock covered by this prospectus will be sold by the selling stockholders.



33


 





 

 

 

 

 

 

 

 

 



 

Beneficial Ownership Prior to This

 

Shares Offered

 

Beneficial Ownership After Offering (1)

Selling Stockholder

 

Offering (1)

 

Hereby (2)

 

Shares

 

Percent

Aspire Capital Fund LP (3)

 

2,202,485 

(3)

5,000,000 

(3)

 

2,202,485 

(3)

4.99% 

GEM Partners LP (4)

 

4,487,643 

(4)

3,876,923 

(4)

 

4,487,643 

(4)

9.99% 

Mark Fisher (5)

 

2,190,287 

(5)

214,000 

(5)

 

2,198,287 

(5)

4.99% 

Thomas Staz Revocable Trust (6)

 

2,160,384 

(6)

1,526,426 

(6)

 

2,074,958 

(6)

4.64% 

Harold Wrobel (7)

 

2,198,737 

(7)

1,000,000 

(7)

 

1,826,737 

(7)

4.07% 

Lewis Titterton (8)

 

2,206,565 

(8)

1,227,473 

(8)

 

1,529,092 

(8)

3.50% 

Peter Higgins (9)

 

1,198,595 

(9)

400,000 

(9)

 

798,595 

 

1.85% 

Andrew Tobias (10)

 

1,065,715 

(10)

285,715 

(10)

 

780,000 

 

1.78% 

Stacie Wilf (11)

 

886,763 

(11)

500,000 

(11)

 

386,763 

 

*

Jamie Rome (12)

 

166,667 

(12)

166,667 

(12)

 

 -

 

*

Michael Simkins (13)

 

384,616 

(13)

384,616 

(13)

 

 -

 

*

Ronald Simkins (14)

 

494,085 

(14)

384,616 

(14)

 

109,469 

 

*

William Walters (15)

 

761,000 

(15)

500,000 

(15)

 

261,000 

 

*

Flavigny LLC (16)

 

714,286 

(16)

714,286 

(16)

 

 -

 

*

Joseph W. Kaempfer, Jr.

 

285,715 

(17)

285,715 

(17)

 

 -

 

*

Judson Longaker 

 

142,858 

(17)

142,858 

(17)

 

 -

 

*

Daniel Frederick Carlson (18)

 

150,000 

(18)

150,000 

(18)

 

 -

 

*

Karl Thomas Egeland (19)

 

50,000 

(19)

50,000 

(19)

 

 -

 

*

 

 

 

 

 

 

 

 

 

 

(1)

The information in the table is based on information supplied to us by the selling stockholders. The percentages of ownership are calculated based on 43,102,745 shares of Common Stock outstanding as of April 17, 2020. Beneficial ownership is determined in accordance with Section 13(d) of the Exchange Act, and generally includes shares over which the selling stockholder has voting or dispositive power, including any shares that the selling stockholder has the right to acquire within 60 days of the date of this prospectus. Beneficial ownership excludes shares underlying notes or warrants that would not be exercisable due to exercise limitations.  Unless otherwise indicated, the selling stockholders have sole voting and dispositive control over the shares of Common Stock.

(2)

The shares of Common Stock offered by this prospectus assumes conversion in full of the entire outstanding principal amount of the September 2019 Notes at $0.10 per share, conversion in full of the entire outstanding principal amount of the January 2020 Notes at $0.13 per share, that interest paid through maturity will be paid in shares of Common Stock at a weighted average price of $0.20 per share, and full exercise of the Aspire and Tailwinds warrants.

(3)

Aspire Capital Partners LLC (“Aspire Partners”) is the Managing Member of Aspire Capital Fund LLC (“Aspire Fund”). SGM Holdings Corp (“SGM”) is the Managing Member of Aspire Partners. Mr. Steven G. Martin (“Mr. Martin”) is the president and sole shareholder of SGM, as well as a principal of Aspire Partners. Mr. Erik J. Brown (“Mr. Brown”) is the president and sole shareholder of Red Cedar Capital Corp (“Red Cedar”), which is a principal of Aspire Partners. Mr. Christos Komissopoulos (“Mr. Komissopoulos”) is president and sole shareholder of Chrisko Investors Inc. (“Chrisko”), which is a principal of Aspire Partners. Mr. William F. Blank, III (“Mr. Blank”) is president and sole shareholder of WML Ventures Corp. (“WML Ventures”), which is a principal of Aspire Partners. Each of Aspire Partners, SGM, Red Cedar, Chrisko, WML Ventures, Mr. Martin, Mr. Brown, Mr. Blank and Mr. Komissopoulos may be deemed to be a beneficial owner of common stock held by Aspire Fund. Each of Aspire Partners, SGM, Red Cedar, Chrisko, WML Ventures, Mr. Martin, Mr. Brown, Mr. Komissopoulos, and Mr. Blank disclaims beneficial ownership of the common stock held by Aspire Fund.  Beneficial ownership prior to the offering includes 1,015,000 shares underlying exercisable warrants held by Aspire Fund and excludes 7,555,000 shares underlying warrants that are not exercisable within 60 days due to exercise limitations, including the 5,000,000 shares being offered herebyBeneficial ownership after the offering includes 1,015,000 shares underlying exercisable warrants held by Aspire and excludes 2,555,000 shares underlying warrants that are not exercisable within 60 days due to exercise limitations.

(4)

GEM Investment Advisors, LLC (“GEM Advisors”) is the general partner of GEM Partners LP (“GEM”) and Flat Rock Partners LP (“FlatRock”). Mr. Daniel Lewis is the controlling person of GEM Advisors. GEM Advisors and Mr. Lewis have shared voting and dispositive power. Beneficial ownership before the offering includes (i) 4,899 shares held by FlatRock, (ii) 6,600 shares held by Mr. Lewis, (iii) 2,649,221 shares held by GEM, and (iv) 1,826,923 shares underlying convertible notes held by GEM, but excludes 8,500,000 shares underlying convertible notes held by GEM that are not convertible within 60 days due to exercise limitations, including 3,076,923 shares underlying the January 2020 Notes being offered hereby.  Beneficial ownership after the offering includes (w) 4,899 shares held by FlatRock, (x) 6,600 shares held by Mr. Lewis, (y) 2,649,221 shares held by GEM, and (z) 2,946,923 shares underlying convertible notes held by GEM, but excludes 5,423,077 shares underlying convertible notes held by GEM that are not convertible within 60 days due to exercise limitations.

34


 

(5)

Mark Fisher is the controlling person of Monroe Capital, LLC (“Monroe”).  Mr. Fisher’s beneficial ownership before the offering includes (i) 1,331,287 shares held by Monroe, including 214,000 shares issued as repayment of the Fisher Note being offered hereby, and (ii) 759,000 shares underlying convertible notes held by Mr. Fisher, but excludes an aggregate of 1,991,000 shares underlying convertible notes that are not convertible within 60 days due to exercise limitations. Mr. Fisher’s beneficial ownership after the offering includes (x) 1,117,287 shares held by Monroe and (y) 981,000 shares underlying convertible notes held by Mr. Fisher, but excludes an aggregate of 1,769,000 shares underlying convertible notes that are not convertible within 60 days due to exercise limitations. Mr. Fisher was a consultant of ours from June to December 2019.

(6)

Thomas Frederick Staz is trustee and has sole voting and dispositive power over the shares held by the Thomas Staz Revocable Trust (“Staz Trust”).  Mr. Staz’ beneficial ownership includes (i) 1,526,426 shares issued to the Staz Trust as repayment of the Staz Note offered hereby and (ii) 159,000 shares underlying convertible notes held by the Staz Trust, but excludes 1,441,000 shares underlying convertible notes that are not convertible within 60 days due to exercise limitations. Mr. Staz’ beneficial ownership after the offering includes all 1,600,000 shares underlying convertible notes held by the Staz Trust.

(7)

Mr. Wrobel’s beneficial ownership before the offering includes (i) 1,000,000 shares issued in the March 2020 PIPE being offered hereby and (ii) 972,000 shares underlying convertible notes held by Mr. Wrobel, but excludes 628,000 shares underlying convertible notes that are not convertible within 60 days due to exercise limitations. Mr. Wrobel’s beneficial ownership after the offering includes all 1,600,000 shares underlying convertible notes held by Mr. Wrobel.

(8)

Mr. Titterton is a former director of ours.  Mr. Titterton’s beneficial ownership before the offering includes (i) 142,858 shares issued in the March 2020 PIPE being offered hereby, (ii) 62,500 shares issuable upon currently exercisable options, and (iii) 1,034,615 shares underlying convertible notes, including 884,615 shares underlying the September 2019 Note and the January 2020 Notes being offered hereby, but excludes 350,000 shares underlying convertible notes that are not convertible within 60 days due to exercise limitations.  Mr. Titterton’s beneficial ownership after the offering includes (x) 62,500 shares issuable upon currently exercisable options and (y) 500,000 shares underlying convertible notes held by Mr. Titterton.

(9)

Mr. Higgins’ beneficial ownership includes 400,000 shares issued in the January 2020 PIPE that are being offered hereby.

(10)

Mr. Tobias’ beneficial ownership includes 285,715 shares issued in the March 2020 PIPE that are being offered hereby.

(11)

Ms. Wilf is the sister of Jeffrey Parker, our chief executive officer and chairman of the board.  Ms. Wilf’s beneficial ownership includes 500,000 shares issued as repayment for amounts due to Ms. Wilf for Milo product sales and support that are being offered hereby.

(12)

Mr. Rome’s beneficial ownership includes 166,667 shares issued in the January 2020 PIPE that are being offered hereby.

(13)

Michael Simkins is trustee and has sole voting and dispositive power over the shares held by the Michael Simkins Grantor Trust.  Beneficial ownership includes 384,616 shares issued in the January 2020 PIPE that are being offered hereby.

(14)

Ronald Simkins is trustee and has sole voting and dispositive power over the shares held by the Ronald Simkins Grantor Trust.  Beneficial ownership includes 384,616 shares issued in the January 2020 PIPE that are being offered hereby.

(15)

Mr. Walters is the controlling person of Chelsea Investor Relations (“Chelsea”).  Chelsea currently provides business consulting services to us under a 24-month consulting agreement.  Mr. Walter’s beneficial ownership includes 500,000 shares issued to Chelsea under the consulting agreement that are being offered hereby and 250,000 shares underlying convertible notes held by Mr. Walters. 

(16)

Xavier Fernandez is the controlling person of Flavigny LLC.  Beneficial ownership includes 714,286 shares issued in the March 2020 PIPE that are being offered hereby.

(17)

Beneficial ownership includes the shares issued in the March 2020 PIPE that are being offered hereby.

(18)

Mr. Carlson, as the owner of Tailwinds, is deemed to have beneficial ownership of 150,000 shares underlying the warrant issued to Tailwinds that are being offered hereby.   Tailwinds has been engaged by us to provide digital marketing services.

(19)

Mr. Egeland is a consultant of Tailwinds and is the beneficial owner of 50,000 shares underlying the warrant issued to Tailwinds that are being offered hereby. 

35


 

PLAN OF DISTRIBUTION



Each selling stockholder and any of their pledgees, assignees and successors-in-interest may, from time to time, sell any or all of the shares of Common Stock covered hereby on the principal trading market for the Common Stock or any other stock exchange, market or trading facility on which the Common Stock is traded or in private transactions. These sales may be at fixed or negotiated prices. A selling stockholder may use any one or more of the following methods when selling securities:

·

ordinary brokerage transactions and transactions in which the broker‑dealer solicits purchasers;

·

block trades in which the broker‑dealer will attempt to sell the securities as agent but may position and resell a portion of the block as principal to facilitate the transaction;

·

purchases by a broker‑dealer as principal and resale by the broker‑dealer for its account;

·

an exchange distribution in accordance with the rules of the applicable exchange;

·

privately negotiated transactions;

·

settlement of short sales;

·

in transactions through broker‑dealers that agree with the Selling Stockholders to sell a specified number of such securities at a stipulated price per security;

·

through the writing or settlement of options or other hedging transactions, whether through an options exchange or otherwise;

·

a combination of any such methods of sale; or

·

any other method permitted pursuant to applicable law.



In order to comply with the securities laws of certain states, if applicable, the shares may be sold only through registered or licensed brokers or dealers. In addition, in certain states, the shares may not be sold unless they have been registered or qualified for sale in the state or an exemption from the registration or qualification requirement is available and complied with.



Further, because our Common Stock is classified as a “penny stock”, broker-dealers who make a market in our Common Stock will be subject to additional sales practice requirements for selling our Common Stock to persons other than established customers and accredited investors. For instance, the broker-dealer must make a special suitability determination for the purchaser and receive the purchaser’s written agreement to the transaction prior to the sale.



The selling stockholders may also sell shares of Common Stock under Rule 144 promulgated under the Securities Act, if available, rather than under this prospectus. In addition, the selling stockholders may transfer the shares of Common Stock by other means not described in this prospectus.



Broker dealers engaged by the selling stockholders may arrange for other brokers dealers to participate in sales. Broker dealers may receive commissions or discounts from the selling stockholders (or, if any broker dealer acts as agent for the purchaser of securities, from the purchaser) in amounts to be negotiated, but, except as set forth in a supplement to this prospectus, in the case of an agency transaction not in excess of a customary brokerage commission in compliance with FINRA Rule 2440; and in the case of a principal transaction a markup or markdown in compliance with FINRA IM-2440.



In connection with the sale of the securities or interests therein, the selling stockholders may enter into hedging transactions with broker-dealers or other financial institutions, which may in turn engage in short sales of the securities in the course of hedging the positions they assume. The selling stockholders may also sell securities short and deliver these securities to close out their short positions, or loan or pledge the securities to broker-dealers that in turn may sell these securities. The selling stockholders may also enter into option or other transactions with broker-dealers or other financial institutions or create one or more derivative securities which require the delivery to such broker-dealer or other financial institution of securities offered by this prospectus, which securities such broker-dealer or other financial institution may resell pursuant to this prospectus (as supplemented or amended to reflect such transaction).



36


 

The selling stockholders and any broker-dealers or agents that are involved in selling the securities may be deemed to be “underwriters” within the meaning of the Securities Act in connection with such sales, and therefore will be required to comply with the prospectus delivery requirements of the Securities Act, including Rule 172 thereunder. Additionally, if the selling stockholders and/or their broker-dealers or agents are deemed to be underwriters, any commissions received by such broker-dealers or agents and any profit on the resale of the securities purchased by them may be deemed to be underwriting commissions or discounts under the Securities Act. Each selling stockholder has informed us that it does not have any written or oral agreement or understanding, directly or indirectly, with any person to distribute the securities.



We are required to pay certain fees and expenses incurred by us incident to the registration of the securities. We have also agreed to provide indemnification and contribution to the selling stockholders against certain civil liabilities, including liabilities under the Securities Act.



We agreed to keep this prospectus effective until the earlier of (i) the date on which the securities may be resold by the selling stockholders without registration and without regard to any volume or manner of sale limitations by reason of Rule 144, without the requirement for us to be in compliance with the current public information requirements under Rule 144 or any other rule of similar effect or (ii) all of the securities have been sold pursuant to this prospectus or Rule 144 or any other rule of similar effect. The securities will be sold only through registered or licensed brokers or dealers if required under applicable state securities laws. In addition, in certain states, the securities covered hereby may not be sold unless they have been registered or qualified for sale in the applicable state or an exemption from the registration or qualification requirement is available and is complied with.



Under applicable rules and regulations under the Exchange Act, any person engaged in the distribution of the securities may not simultaneously engage in market making activities with respect to our Common Stock for the applicable restricted period, as defined in Regulation M, prior to the commencement of the distribution. In addition, the selling stockholders will be subject to applicable provisions of the Exchange Act and the rules and regulations thereunder, including Regulation M, which may limit the timing of purchases and sales of Common Stock by the selling stockholders or any other person. We will make copies of this prospectus available to the selling stockholders and have informed them of the need to deliver a copy of this prospectus to each purchaser at or prior to the time of the sale (including by compliance with Rule 172 under the Securities Act).



37


 



DESCRIPTION OF SECURITIES



The following description of our capital stock is a summary only and is qualified by reference to our Amended and Restated Certificate of Incorporation and Amended and Restated Bylaws, which are included herewith as Exhibits 3.1 through 3.7, respectively.



Common Stock



We are authorized to issue up to 110,000,000 shares of Common Stock, $0.01 par value per share. As of April 17, 2020, there were 43,102,745 shares of our Common Stock outstanding. Holders of our Common Stock are entitled to one vote per share on all matters submitted to a vote of stockholders and may not cumulate votes for the election of directors. Common Stockholders have the right to receive dividends when, as, and if declared by the Board from funds legally available therefore. Holders of Common Stock have no preemptive rights and have no rights to convert their Common Stock into any other securities.



Shareholder Protection Rights Plan



We have a Shareholder Protection Rights Agreement (“Rights Agreement”), originally adopted on November 21, 2005 and amended on November 20, 2015, pursuant to which we issued, on November 29, 2005, as a dividend, one right to acquire a fraction of a share of Series E Preferred Stock for each then outstanding share of Common Stock. Each share of Common Stock issued by us after such date also has included, and any subsequent shares of Common Stock issued by us prior to the Separation Time (as defined in the Rights Agreement) will include, an attached right. The following description of the Rights Agreement, and any description of the Rights Agreement included in a prospectus supplement, may not be complete and is subject to and qualified in its entirety by reference to the terms and provisions of the Rights Agreement.



The principal objective of the Rights Agreement is to cause someone interested in acquiring us to negotiate with our Board rather than launch an unsolicited or hostile bid. The Rights Agreement subjects a potential acquirer to substantial voting and economic dilution.



The rights initially are not exercisable and trade with our Common Stock. In the future, the rights may become exercisable with various provisions that may discourage a takeover bid. If a potential acquirer initiates a takeover bid or becomes the beneficial owner of 15% or more of our Common Stock, the rights will separate from the Common Stock. Upon separation, the holders of the rights may exercise their rights at an exercise price of $14.50 per right (the “Exercise Price”), subject to adjustment and payable in cash. Additionally, the rights have what are known as “flip-in” and “flip-over” provisions that could make any acquisition of us more costly to the potential acquirer. The “flip-in” provision provides that, in the event a potential acquirer acquires 15% or more of the outstanding shares of our Common Stock, upon payment of the exercise price, the holders of the rights will receive from us that number of shares of Common Stock having an aggregate market price equal to twice the Exercise Price, as adjusted. The “flip-over” provision allows the holder to purchase that number of shares of common/voting equity of a successor entity, if we are not the surviving corporation in a business combination, with an aggregate market price equal to twice the Exercise Price.



We have the right to substitute for any of our shares of Common Stock that we are obligated to issue, shares of Series E Preferred Stock at a ratio of one thousandth of a share of Series E Preferred Stock for each share of Common Stock.



The rights may be redeemed upon approval of the Board at a redemption price of $0.01 per right. The Rights Agreement expires on November 20, 2020.



Classified Board; Director Nominations; Special Meetings



Our Board is divided into three classes, with only one class of directors elected at each annual meeting, and our shareholders may remove our directors only for cause. Nominations for our Board may be made by our Board or by any holder of Common Stock. A shareholder entitled to vote for the election of directors may nominate a person for election as director only if the shareholder provides written notice of his nomination to our secretary not later than 120 days in advance of the same day and month that our proxy statement was released to shareholders in connection with the previous year’s annual meeting of shareholders or, if no annual meeting was held in the previous year, then by the end of the fiscal year to which the annual meeting in which the nomination will be made relates. A special meeting of our shareholders may be called only by our Board or our chief executive officer. These provisions and the Board’s right to issue shares of our preferred stock from time to time, in one or more classes or series without stockholder approval, are intended to enhance the likelihood of continuity and stability in the composition of the policies formulated by our Board. These provisions are also intended to discourage some tactics that may be used in proxy fights.

38


 



LEGAL MATTERS



The legality of the Common Stock offered by this prospectus has been passed upon by Graubard Miller, New York, New York. Graubard Miller owns shares of our Common Stock constituting less than 1% of our outstanding shares of Common Stock.



EXPERTS



The financial statements as of December 31, 2019 and for the year ended December 31, 2019 included in this Prospectus and in the Registration Statement have been so included in reliance on the report (which contains an explanatory paragraph relating to our ability to continue as a going concern as described in Note 2 to the consolidated financial statements) of MSL, P.A., an independent registered public accounting firm, given on the authority of said firm as experts in auditing and accounting.



The financial statements as of December 31, 2018 and for the year ended December 31, 2018 included in this Prospectus and in the Registration Statement have been so included in reliance on the report (which contains an explanatory paragraph relating to our ability to continue as a going concern as described in Note 2 to the consolidated financial statements) of BDO USA, LLP, an independent registered public accounting firm, given on the authority of said firm as experts in auditing and accounting.



WHERE YOU CAN FIND MORE INFORMATION



We file annual, quarterly and current reports, proxy statements and other information with the SEC. Our SEC filings are available to the public over the Internet at the SEC’s web site at http://www.sec.gov. Our Common Stock is traded on the OTCQB Market.



We have filed with the SEC a Registration Statement on Form S-1 relating to the Common Stock to be sold in this offering. The registration statement, including the attached exhibits and schedules, contains additional relevant information about us and our capital stock. This prospectus does not contain all of the information set forth in the Registration Statement and the exhibits and schedules thereto. For further information about us and our Common Stock, you should refer to the Registration Statement, including the exhibits and schedules thereto. Statements contained in this prospectus as to the contents of any contract or other document referred to are not necessarily complete and in each instance, if such contract or document is filed as an exhibit, reference is made to the copy of such contract or other document filed as an exhibit to the Registration Statement, each statement being qualified in all respects by such reference.

 

39


 







 

Index to Consolidated Financial Statements 



Page 



 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM (for the year ended December 31, 2019)

F-2



 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM (for the year ended December 31, 2018)

F-3



 

CONSOLIDATED FINANCIAL STATEMENTS:

 

Consolidated Balance Sheets - December 31, 2019 and 2018

F-4

Consolidated Statements of Comprehensive Loss - for the years ended December 31, 2019 and 2018

F-5

Consolidated Statements of Shareholders’ Deficit - for the years ended December 31, 2019 and 2018

F-6

Consolidated Statements of Cash Flows - for the years ended December 31, 2019 and 2018

F-7

Notes to Consolidated Financial Statements - December 31, 2019 and 2018

F-8



 

SUPPLEMENTARY DATA:

 

Not applicable

 





F-1


 

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 sheet of ParkerVision, Inc. (the “Company”) and its subsidiary as of December 31, 2019, and the related consolidated statements of comprehensive loss, shareholders’ deficit and cash flows for the year then ended, and the related notes (collectively referred to as the “consolidated financial statements”).  In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company and its subsidiary at December 31, 2019, and the results of their operations and their cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America.



Basis for Opinion



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



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



Emphasis of Matter Regarding Going Concern



The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 and Note 9 to the consolidated financial statements, the Company has suffered recurring losses from operations, is in payment default on certain debt, 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 and Note 9. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.  Our opinion is not modified with respect to this matter





/s/ MSL, P.A.



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

Fort Lauderdale, Florida

April 14, 2020

F-2


 

Report of Independent Registered Public Accounting Firm



Shareholders and Board of Directors

ParkerVision, Inc.

Jacksonville, Florida



Opinion on the Consolidated Financial Statements



We have audited the accompanying consolidated balance sheet of ParkerVision, Inc. (the “Company”) and its subsidiary as of December 31, 2018, and the related consolidated statements of comprehensive loss, shareholders’ deficit and cash flows for the year then ended, and the related notes (collectively referred to as the “consolidated financial statements”).  In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company and its subsidiary at December 31, 2018, and the results of their operations and their cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America.



Basis for Opinion



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



We conducted our audit in accordance with the standards of the PCAOB and in accordance with auditing standards generally accepted in the United States of America.  Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audit included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks.  Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements.  Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.  We believe that our audit provides a reasonable basis for our opinion.



Emphasis of Matter Regarding Going Concern



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







/s/ BDO USA, LLP

Certified Public Accountants



We served as the Company's auditor in 2018.

Jacksonville, Florida



April 1, 2019

 

F-3


 

PARKERVISION, INC.

CONSOLIDATED BALANCE SHEETS

DECEMBER 31, 2019 AND 2018

 



 

 

 

 

 



 

 

 

 

 



 

 

 

 

 



2019

 

2018

CURRENT ASSETS:

 

 

 

 

 

Cash and cash equivalents

$

57 

 

$

1,527 

Accounts receivable, net

 

 -

 

 

Finished goods inventories, net

 

 -

 

 

98 

Prepaid expenses

 

505 

 

 

538 

Other current assets

 

117 

 

 

55 

Held for sale assets

 

 -

 

 

65 

Total current assets

 

679 

 

 

2,285 



 

 

 

 

 

Property and equipment, net

 

70 

 

 

129 

Intangible assets, net

 

2,878 

 

 

3,902 

Operating lease right-of-use assets

 

283 

 

 

 -

Other assets, net

 

16 

 

 

15 

Total assets

$

3,926 

 

$

6,331 



 

 

 

 

 

CURRENT LIABILITIES:

 

 

 

 

 

Accounts payable

$

2,328 

 

$

655 

Accrued expenses:

 

 

 

 

 

Salaries and wages

 

78 

 

 

122 

Professional fees

 

499 

 

 

379 

Statutory court costs

 

369 

 

 

114 

Other accrued expenses

 

1,081 

 

 

563 

Related party note payable, current portion

 

86 

 

 

37 

Secured note payable, current portion

 

1,222 

 

 

2,400 

Unsecured notes payable

 

225 

 

 

 -

Operating lease liabilities, current portion

 

250 

 

 

86 

Total current liabilities

 

6,138 

 

 

4,356 



 

 

 

 

 

LONG-TERM LIABILITIES:

 

 

 

 

 

Secured contingent payment obligation

 

26,651 

 

 

25,557 

Convertible notes, net

 

2,733 

 

 

837 

Related party note payable, net of current portion

 

793 

 

 

799 

Operating lease liabilities, net of current portion

 

305 

 

 

91 

Other long-term liabilities

 

403 

 

 

Total long-term liabilities

 

30,885 

 

 

27,285 

Total liabilities

 

37,023 

 

 

31,641 



 

 

 

 

 

COMMITMENTS AND CONTINGENCIES

 

 

 

 

 



 

 

 

 

 

SHAREHOLDERS' DEFICIT:

 

 

 

 

 

Common stock, $.01 par value, 110,000 and 75,000 shares authorized, 34,097 and 28,677 issued and outstanding at December 31, 2019 and 2018, respectively

 

341 

 

 

287 

Warrants outstanding

 

1,330 

 

 

1,810 

Additional paid-in capital

 

367,015 

 

 

364,885 

Accumulated deficit

 

(401,783)

 

 

(392,292)

Total shareholders' deficit

 

(33,097)

 

 

(25,310)

Total liabilities and shareholders' deficit

$

3,926 

 

$

6,331 



 

 

 

 

 



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





 

F-4


 

PARKERVISION, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

FOR THE YEARS ENDED DECEMBER 31, 2019 AND 2018

(in thousands, except per share amounts)