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, 2021 (the "2021 Annual Report") and in this Item 2 of Part I of
this quarterly report. Examples of such risks and uncertainties include general
economic and business conditions, competition, unexpected changes in
technologies and technological advances, the timely development and commercial
acceptance of new products and technologies, reliance on key suppliers, reliance
on our intellectual property, the outcome of our intellectual property
litigation and the ability to obtain adequate financing in the future. We have
no obligation to publicly release the results of any revisions which may be made
to any forward-looking statements to reflect anticipated events or circumstances
occurring after the date of such statements.
Corporate Website
We announce investor information, including news and commentary about our
business, financial performance and related matters, SEC filings, notices of
investor events, and our press and earnings releases, in the investor relations
section of our website (http://ir.parkervision.com). Additionally, if
applicable, we webcast our earnings calls and certain events we participate in
or host with members of the investment community in the investor relations
section of our website. Investors and others can receive notifications of new
information posted in the investor relations section in real time by signing up
for email alerts and/or RSS feeds. Further corporate governance information,
including our governance guidelines, board 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 and 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 infringement litigation and
licensing efforts. We currently have patent enforcement actions ongoing in
various U.S. district courts against providers of mobile handsets and providers
of smart televisions and other WiFi products and, in certain cases, their chip
suppliers, for the infringement of several of our RF patents. We have made
significant investments in developing and protecting our technologies, the
returns on which are dependent upon the generation of future revenues for
realization.
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Recent Events
Legal Proceedings
On March 9, 2022, the U.S. District Court in the Middle District of Florida
granted a Qualcomm motion to strike and exclude opinions regarding alleged
infringement and validity issues in ParkerVision v. Qualcomm. This court order
precluded the presentation of infringement and validity opinions by both of our
experts at trial. On March 22, 2022, the same court issued an order granting
Qualcomm's motion for summary judgment ruling that Qualcomm does not infringe
the three patents in the case. On April 20, 2022, we filed a notice of appeal to
the United States Court of Appeals for the Federal Circuit. As a result of the
court's summary judgment motion in favor of Qualcomm, Qualcomm has the right to
petition the court for its fees and costs. The court has granted a Qualcomm
motion to delay such a petition until 30 days following the appellate court's
decision.
In May 2022, we filed a motion to amend our complaint in ParkerVision v. Intel
to add willful infringement based on information obtained in discovery.
Sale of Convertible Notes
On May 10, 2022, we received proceeds of $0.3 million from the sale of five-year
convertible notes to accredited investors, including Paul Rosenbaum, one of our
directors. 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. We
also entered into a registration rights agreement with the investors pursuant to
which we will register the shares underlying the notes.
Liquidity and Capital Resources
We have incurred significant losses from operations and negative operating cash
flows in every year since inception, largely as a result of our significant
investments in developing and protecting our intellectual property, and have
utilized the proceeds from sales of debt and equity securities and contingent
funding arrangements with third-parties to fund our operations, including the
cost of litigation.
For the three months ended March 31, 2022, we recognized net income of
approximately $0.3 million and incurred negative cash flows from operations of
approximately $0.9 million. At March 31, 2022, we had cash and cash equivalents
of approximately $0.2 million and an accumulated deficit of approximately
$433.1 million. Additionally, 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 our condensed consolidated financial statements.
We used cash for operations of approximately $0.9 million and $5.0 million for
the three months ended March 31, 2022 and 2021, respectively. The decrease in
cash used for operations from 2021 to 2022 is primarily due to the use of
approximately $4.0 million in cash for the reduction of accounts payables and
accrued expenses during the three months ended March 31, 2021, as compared to a
$0.2 million increase in accounts payable and accrued expenses during the three
months ended March 31, 2022. For the three months ended March 31, 2022, we
received aggregate net proceeds from the sale of debt and equity securities,
including the exercise of outstanding options and warrants, of approximately
$0.1 million compared to approximately $5.6 million in proceeds received for the
three months ended March 31, 2021. We repaid approximately $0.02 million in debt
obligations during each of the three months ended March 31, 2022 and 2021.
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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. Furthermore, we expect that revenue
generated from patent enforcement actions and/or technology licenses in the
remainder of 2022, if any, after deduction of payment obligations to third-party
litigation funders, legal counsel, and other investors, may not be sufficient to
cover our operating expenses.
Our current capital resources, including $0.3 million in proceeds received from
the sale of convertible notes in May 2022, 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 both our short-term and long-term liquidity needs, including
our debt repayment obligations, is dependent upon (i) our ability to
successfully negotiate licensing agreements and/or settlements relating to the
use of our technologies by others in excess of our contingent payment
obligations to third-party litigation funders, legal counsel, and other
investors; (ii) our ability to control operating costs, and (iii) our ability to
raise additional capital from the sale of debt or equity securities or other
financing arrangements. Failure to generate sufficient revenues, raise
additional capital through debt or equity financings or contingent fee
arrangements, and/or reduce operating costs will have a material adverse effect
on our ability to meet our long-term liquidity needs and our ability to achieve
our intended long-term business objectives.
Financial Condition
Our working capital decreased approximately $1.0 million from December 31, 2021
to March 31, 2022. This decrease in working capital is primarily the result of
cash used in operations during the three months ended March 31, 2022.
Our long-term liabilities decreased approximately $2.4 million during the three
months ended March 31, 2022, primarily as a result of the $2.3 million decrease
in the estimated fair value of our secured and unsecured contingent payment
obligations.
Results of Operations for Each of the Three Months Ended March 31, 2022 and 2021
Revenue
We reported no licensing revenue for the three-month periods ended March 31,
2022 or 2021. Cost of sales consists of amortization expense related to the
patents covered under license agreements reached during the year ended December
31, 2021. Although we do anticipate additional revenue to result from our
licensing agreements and patent enforcement actions, the amount and timing is
highly unpredictable 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 decreased by approximately
$0.3 million, or 13%, during the three months ended March 31, 2022 when compared
to the same period in 2021. This is primarily the result of a $0.2 million
decrease in share-based compensation for the comparable periods and a $0.1
million decrease in litigation fees and expenses.
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The decrease in our share-based compensation for the three-month period ended
March 31, 2022 is the result of share-based compensation expense attributed to
restricted stock units and nonqualified stock options awarded to executives, key
employees and nonemployee directors in 2019 and 2020 being fully recognized as
of December 31, 2021. As of March 31, 2022, we had $2.2 million of total
unrecognized compensation cost related to all non-vested share-based
compensation awards that is expected to be recognized over a period of
approximately 0.75 years.
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 March 31, 2022, we recorded an aggregate decrease in
the fair value of our secured and unsecured contingent payment obligations of
approximately $2.3 million, compared to an increase of approximately $0.2
million for the three months ended March 31, 2021. The change in fair value for
the three months ended March 31, 2022 was impacted by a sharp increase in the
risk-free interest rate used in the calculation as a result of the Federal
Reserve ending bond purchases and signaling it would implement multiple rate
increases during 2022, resulting in a $1.8 million decrease in the fair value of
our secured and unsecured contingent payment obligations. The remaining decrease
is a result of changes in the estimated amounts and timing of projected future
cash flows due to changes in probabilities and time frames based on changes in
the status of patent infringement actions.
Off-Balance Sheet Transactions, Arrangements and Other Relationships
As of March 31, 2022, we had outstanding warrants to purchase approximately
10.3 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 $0.75 per share and a weighted average
remaining life of approximately 2.8 years.
Critical Accounting Policies
There have been no changes in accounting policies from those stated in our 2021
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.
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