Parkervision Inc: Form 10-Q for the period ended Sep 30, 2024

Forward-Looking Statements

We believe that it is important to communicate our future expectations to our shareholders and to the public. This quarterly report contains forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995, including, in particular, statements about our future plans, objectives, and expectations contained in this Item. When used in this quarterly report and in future filings by us with the Securities and Exchange Commission (“SEC”), the words or phrases “expects”, “will likely result”, “will continue”, “is anticipated”, “estimated” or similar expressions are intended to identify “forward-looking statements.” Readers are cautioned not to place undue reliance on such forward-looking statements, each of which speaks only as of the date made. Such statements are subject to certain risks and uncertainties that could cause actual results to differ materially from historical results and those presently anticipated or projected, including the risks and uncertainties identified in our annual report on Form 10-K for the fiscal year ended December 31, 2023 (the “2023 Annual Report”) and in this Item 2 of Part I of this quarterly report. Examples of such risks and uncertainties include general economic and business conditions, competition, unexpected changes in technologies and technological advances, the timely development and commercial acceptance of new products and technologies, reliance on our intellectual property, the outcome of our intellectual property litigation and the ability to obtain adequate financing in the future. We have no obligation to publicly release the results of any revisions which may be made to any forward-looking statements to reflect anticipated events or circumstances occurring after the date of such statements.

Corporate Website

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

Overview

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

Recent Events

On September 6, 2024, the U.S. Court of Appeals for the Federal Circuit ("CAFC") issued it opinion, ruling in our favor on each of the issues we appealed and remanding the case back to the Middle District of Florida (Orlando) where the case will be reopened.

Subsequent to September 30, 2024, our convertible debt was reduced by an aggregate of approximately $0.64 million as a result of conversions, at the option of the debt holders, into shares of our common stock at conversion prices ranging from $0.10 to $0.25. In addition, we received proceeds of approximately $0.14 million from the exercise of outstanding options.

Liquidity and Capital Resources

We used cash for operations of approximately $2.1 million for the nine months ended September 30, 2024 and generated cash from operations of $11.5 million for the nine months ended September 30, 2023. The decrease in cash generated from operations from 2023 to 2024 is primarily due to proceeds received from the patent license and settlement agreement entered into in February 2023, net of contingent legal fees and expenses paid.

At September 30, 2024, we had cash and cash equivalents of approximately $0.8 million, an accumulated deficit of $445.5 million, and a working capital deficit of $1.5 million. At September 30, 2024, we had $2.4 million in current liabilities, including approximately $1.1 million in convertible debt that matures over the next twelve months. In addition, a significant amount of future proceeds that we may receive from our patent enforcement and licensing programs will first be utilized to repay borrowings and legal fees and expenses under our contingent funding arrangements. These circumstances raise substantial doubt about our ability to continue to operate as a going concern for a period of one year following the issue date of these condensed consolidated financial statements.

Approximately $0.64 million in convertible notes, including accrued interest thereon, were converted by the holders into shares of our common stock subsequent to September 30, 2024, and all of our remaining convertible notes have conversion prices that are substantially below the market price of our common stock as of September 30, 2024. We anticipate that all of our outstanding convertible notes will be converted by the holders prior to their scheduled maturity dates. However, even with the anticipated conversions of our convertible debt, our current capital resources are not sufficient to meet our liquidity needs for the next twelve months and we will be required to seek additional capital. Our ability to meet our liquidity needs for the next twelve months is dependent upon (i) our ability to successfully negotiate licensing agreements and/or settlements relating to the use of our technologies by others in excess of our contingent payment obligations, (ii) our ability to control operating costs, and/or (iii) our ability to obtain additional debt or equity financing. We expect that proceeds received by us from patent enforcement actions and technology licenses over the next twelve months may not alone be sufficient to cover our working capital requirements.

We expect to continue to invest in the support of our patent licensing and enforcement program. The long-term continuation of our business plan is dependent upon the generation of sufficient cash flows from our technologies and/or products to offset expenses and debt obligations. In the event that we do not generate sufficient cash flows, we will be required to obtain additional funding through public or private debt or equity financing or contingent fee arrangements and/or reduce operating costs. Failure to generate sufficient cash flows, raise additional capital through debt or equity financings or contingent fee arrangements, and/or reduce operating costs will have a material adverse effect on our ability to meet our long-term liquidity needs and achieve our intended long-term business objectives.

Financial Condition

Our working capital decreased approximately $1.8 million from December 31, 2023 to September 30, 2024. This decrease in working capital is primarily the result of cash used in operations during the nine months ended September 30, 2024.

Our long-term liabilities increased $8.5 million from December 31, 2023 to September 30, 2024, primarily due to an overall increase in the estimated fair value our contingent payment obligations of $8.9 million. Refer to "Change in Fair Value of Contingent Payment Obligations" below.

Results of Operations for the Three and Nine Months Ended September 30, 2024 and 2023

Revenue and Cost of Sales

We reported no licensing revenue for the three and nine months ended September 30, 2024 or the three months ended September 30, 2023. Licensing revenue was $25.0 million for the nine months ended September 30, 2023, resulting from a patent license and settlement agreement entered into in February 2023. The parties' performance obligations were met in February 2023 and we recognized revenue at that time. Cost of sales for the three and nine months ended September 30, 2024 and 2023 consists of amortization expense related to the patents covered under license agreements. Revenue resulting from our patent enforcement actions is highly unpredictable with respect to the amount and timing of receipt, and there can be no assurance that we will achieve our anticipated results.

Selling, General, and Administrative Expenses

Selling, general, and administrative expenses consist primarily of litigation fees and expenses, personnel and related costs, including share-based compensation, for executive, Board, finance and accounting and technical support personnel for our patent enforcement program, and costs incurred for insurance and outside professional fees for accounting, legal and business consulting services.

Our selling, general and administrative expenses increased by less than $0.1 million, or 8.4%, during the three months ended September 30, 2024 when compared to the same period in 2023. This is primarily the result of a $0.1 million increase in litigation fees and expenses.

Our selling, general and administrative expenses decreased by approximately $11.7 million, or 82.7%, during the nine months ended September 30, 2024 when compared to the same period in 2023. This is primarily the result of an $10.9 million decrease in litigation fees and expenses, a $0.4 million decrease in compensation expense, including share-based compensation, and a $0.3 million decrease in consulting expenses.

The increase in litigation fees and expenses for the three months ended September 30, 2024 is the result of the settlement of a contingent obligation. The decrease in litigation fees and expenses for the nine months ended September 30, 2024 is the result of contingent legal fees and expenses recognized in 2023 in conjunction with the confidential patent license and settlement agreement reached in February 2023.

The decrease in our compensation expense for the nine months ended September 30, 2024 is the result of bonuses paid and share-based awards issued to employees and executives in 2023. As of September 30, 2024, we had $0.1 million of total unrecognized compensation cost related to non-vested share-based compensation awards that is expected to be recognized over a period of approximately 0.7 years. The decrease in consulting fees for the nine months ended September 30, 2024 is primarily due to decisions not to continue or extend prior consulting arrangements as a result of changes in business strategy.

Change in Fair Value of Contingent Payment Obligations

We have elected to measure our secured and unsecured contingent payment obligations at fair value which is based on significant unobservable inputs. We estimated the fair value of our secured contingent payment obligations using a probability-weighted income approach based on the estimated present value of projected future cash outflows using a risk-adjusted discount rate. Increases or decreases in the significant unobservable inputs could result in significant increases or decreases in fair value. Generally, changes in fair value are a result of changes in estimated amounts and timing of projected future cash flows due to increases in funded amounts, passage of time, and changes in the probabilities based on the status of the funded actions.

For the three months ended September 30, 2024 and 2023, we recorded aggregate increases in the fair value of our secured and unsecured contingent payment obligations of approximately $9.7 million and $2.9 million, respectively. For the nine months ended September 30, 2024, we recorded an aggregate increase in the fair value of our secured and unsecured contingent payment obligations of approximately $9.0 million compared to an aggregate decrease of $0.2 million for the nine months ended September 30, 2023. The change in fair value for the three and nine months ended September 30, 2024 was primarily the result of changes in the estimated amounts and timing of projected future cash flows due to changes in probabilities and time frames based on the status of various patent infringement actions, particularly as a result of the favorable CAFC decision received in September 2024 that remanded the Qualcomm case back to district court.

Off-Balance Sheet Transactions, Arrangements and Other Relationships

As of September 30, 2024, we had outstanding warrants to purchase approximately 7.7 million shares of our common stock. The estimated grant date fair value of these warrants of approximately $3.2 million is included in shareholders’ deficit in our condensed consolidated balance sheets. The outstanding warrants have a weighted average exercise price of $0.95 per share and a weighted average remaining life of approximately 0.8 years.

Critical Accounting Policies

There have been no changes in accounting policies from those stated in our 2023 Annual Report. We do not expect any newly effective accounting standards to have a material impact on our financial position, results of operations or cash flows when they become effective.

Evaluation of Disclosure Controls and Procedures

As of September 30, 2024, our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our “disclosure controls and procedures,” as defined in Rule 13a-15(e) and 15d-15(e) under the Securities and Exchange Act of 1934, as amended (the “Exchange Act”). Based upon this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that these disclosure controls and procedures were effective as of September 30, 2024.

Changes in Internal Control Over Financial Reporting

There have been no changes in our internal control over financial reporting identified in connection with the evaluation required by Rule 13a-15(d) under the Exchange Act that occurred during the last fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

There have been no material changes from the risk factors disclosed in Item 1A of Part I of our Annual Report. In addition to the information in this quarterly report, the risk factors disclosed in our Annual Report should be carefully considered in evaluating our business because such factors may have a significant impact on our business, operating results, liquidity and financial condition.