PARKERVISION INC 10-K

Item 8. Financial Statements and Supplementary Data. Index to Consolidated Financial Statements Page REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM (for the years ended December 31, 2023 and 2022) (PCAOB ID: 569 ) 22 FINANCIAL STATEMENTS: Consolidated Balance Sheets – December 31, 2023 and 2022 24 Consolidated Statements of Comprehensive Income (Loss) - for the years ended December 31, 2023 and 2022 25 Consolidated Statements of Shareholders’ Deficit - for the years ended December 31, 2023 and 2022 26 Consolidated Statements of Cash Flows - for the years ended December 31, 2023 and 2022 27 Notes to Consolidated Financial Statements - December 31, 2023 and 2022 28 SUPPLEMENTARY DATA: Not applicable 21 Table of Contents REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Board of Directors and Shareholders ParkerVision, Inc. Opinion on the Consolidated Financial Statements We have audited the accompanying consolidated balance sheets of ParkerVision, Inc. (the “Company”) and its subsidiary as of December 31, 2023 and 2022, and the related consolidated statements of comprehensive income (loss), shareholders’ deficit and cash flows for each of the years in the two-year period ended December 31, 2023, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company and its subsidiary as of December 31, 2023 and 2022, and the results of their operations and their cash flows for each of the years in the two-year period ended December 31, 2023 in conformity with accounting principles generally accepted in the United States of America. Substantial Doubt About the Entity's Ability to Continue as a 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's current resources are not sufficient to meet their liquidity needs for the next twelve months, the Company has historically 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 evaluation of the events and conditions and management's plans regarding those 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. Basis for Opinion These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As a part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion. 22 Table of Contents Critical Audit Matters The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate. Estimation of Fair Value of Contingent Payment Obligations As disclosed in Note 1 of the Company’s consolidated financial statements, the Company accounts for their secured and unsecured contingent payment obligations as long-term debt. Their payment obligations are contingent upon the receipt of proceeds from patent enforcement and/or patent monetization actions. The Company has elected to measure their contingent payment obligations at their estimated fair values. The Company recorded the fair value of their contingent payment obligations at approximately $37,020,000 as of December 31, 2023. Auditing management’s estimate of the fair value of their contingent payment obligations involved subjective evaluation and a high degree of auditor judgement due to significant assumptions involved in estimating the receipt of proceeds from patent enforcement and/or patent monetization actions. Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. We obtained an understanding and evaluated the design of internal controls that address the risks of material misstatement relating to recording the contingent payment obligations at fair value. We tested the accuracy and completeness of the underlying data used in calculating the fair value. We evaluated management’s ability to accurately estimate the assumptions used to develop the fair value of the contingent payment obligations. We also involved an independent legal firm to assist in evaluating the reasonableness of the assumptions of future litigation outcomes used by the Company in estimating the receipt of proceeds from patent enforcement and/or patent monetization actions. /s/ MSL, P.A. We have served as the Company’s auditor since 2019. Fort Lauderdale, Florida March 21, 2024 23 Table of Contents PARKERVISION, INC. CONSOLIDATED BALANCE SHEETS December 31, 2023 and 2022 (in thousands) 2023 2022 CURRENT ASSETS: Cash and cash equivalents $ 2,560 $ 109 Prepaid expenses 61 244 Other current assets 34 30 Total current assets 2,655 383 Intangible assets, net 1,055 1,359 Other assets, net 313 9 Total assets $ 4,023 $ 1,751 CURRENT LIABILITIES: Accounts payable $ 573 $ 901 Accrued expenses: Salaries and wages 23 23 Professional fees 67 79 Other accrued expenses 447 490 Convertible notes, current portion 1,045 625 Related party note payable, current portion 134 139 Total current liabilities 2,289 2,257 LONG-TERM LIABILITIES: Secured contingent payment obligation 29,402 40,708 Unsecured contingent payment obligations 7,618 5,089 Convertible notes, net of current portion 3,893 3,913 Related party note payable, net of current portion 340 473 Total long-term liabilities 41,253 50,183 Total liabilities 43,542 52,440 COMMITMENTS AND CONTINGENCIES SHAREHOLDERS' DEFICIT: Common stock, $ .01 par value, 175,000 shares authorized, 87,681 and 81,246 issued and outstanding at December 31, 2023 and 2022, respectively 877 812 Additional paid-in capital 393,314 391,724 Accumulated deficit ( 433,710 ) ( 443,225 ) Total shareholders' deficit ( 39,519 ) ( 50,689 ) Total liabilities and shareholders' deficit $ 4,023 $ 1,751 The accompanying notes are an integral part of these consolidated financial statements. 24 Table of Contents PARKERVISION, INC. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) FOR THE YEARS ENDED December 31, 2023 and 2022 (in thousands, except per share amounts) 2023 2022 Licensing revenue $ 25,000 $ 925 Cost of sales ( 227 ) ( 10 ) Gross margin 24,773 915 Selling, general, and administrative expenses 14,744 7,773 Total operating expenses 14,744 7,773 Interest and other income 58 103 Interest and other expense ( 424 ) ( 324 ) Change in fair value of contingent payment obligations ( 148 ) ( 2,734 ) Total interest and other ( 514 ) ( 2,955 ) Net income (loss) before income tax 9,515 ( 9,813 ) Provision for income taxes - - Net income (loss) 9,515 ( 9,813 ) Other comprehensive income, net of tax - - Comprehensive income (loss) $ 9,515 $ ( 9,813 ) Earnings (loss) per common share Basic $ 0.11 $ ( 0.13 ) Diluted $ 0.08 $ ( 0.13 ) Weighted average common shares outstanding Basic 85,732 78,395 Diluted 119,888 78,395 The accompanying notes are an integral part of these consolidated financial statements. 25 Table of Contents PARKERVISION, INC. CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ DEFICIT FOR THE YEARS ENDED December 31, 2023 and 2022 (in thousands) Common Stock, Par Value Additional Paid-in Capital Accumulated Deficit Total Shareholders' Deficit Balance as of December 31, 2021 $ 770 $ 387,865 $ ( 433,412 ) $ ( 44,777 ) Issuance of common stock and warrants in public and private offerings, net of issuance costs 20 362 - 382 Issuance of common stock upon exercise of options and warrants 5 78 - 83 Issuance of common stock and warrants for services 2 57 - 59 Issuance of common stock upon conversion and payment of interest in kind on convertible debt 14 282 - 296 Share-based compensation, net of shares withheld for taxes 1 3,080 - 3,081 Net loss for the year - - ( 9,813 ) ( 9,813 ) Balance as of December 31, 2022 812 391,724 ( 443,225 ) ( 50,689 ) Issuance of common stock and warrants in public and private offerings, net of issuance costs 8 422 - 430 Issuance of common stock upon exercise of options and warrants 1 3 - 4 Issuance of common stock, warrants, and options for services 5 122 - 127 Issuance of common stock upon conversion and payment of interest in kind on convertible debt 49 542 - 591 Share-based compensation, net of shares withheld for taxes 2 501 - 503 Net income for the year - - 9,515 9,515 Balance as of December 31, 2023 $ 877 $ 393,314 $ ( 433,710 ) $ ( 39,519 ) The accompanying notes are an integral part of these consolidated financial statements. 26 Table of Contents PARKERVISION, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED December 31, 2023 and 2022 (in thousands) 2023 2022 CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss) $ 9,515 $ ( 9,813 ) Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Depreciation and amortization 256 311 Share-based compensation 503 3,081 Change in fair value of contingent payment obligations 148 2,734 Loss on disposal/impairment of equipment and intangible assets 55 124 Paid in kind interest expense 402 299 Changes in operating assets and liabilities: Prepaid expenses and other assets 306 396 Accounts payable and accrued expenses ( 394 ) ( 91 ) Total adjustments 1,276 6,854 Net cash provided by (used in) operating activities 10,791 ( 2,959 ) CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of property and equipment ( 2 ) ( 4 ) Net cash used in investing activities ( 2 ) ( 4 ) CASH FLOWS FROM FINANCING ACTIVITIES: Net proceeds from issuance of common stock in private offerings 121 382 Net proceeds from exercise of options and warrants 4 83 Net proceeds from debt financings 800 1,668 Proceeds from contingent payment obligation 5,000 - Repayment of contingent payment obligation ( 13,925 ) - Principal payments on long-term debt ( 338 ) ( 91 ) Net cash (used in) provided by financing activities ( 8,338 ) 2,042 NET CHANGE IN CASH AND CASH EQUIVALENTS 2,451 ( 921 ) CASH AND CASH EQUIVALENTS, beginning of year 109 1,030 CASH AND CASH EQUIVALENTS, end of year $ 2,560 $ 109 SUPPLEMENTAL CASH FLOW INFORMATION: Cash paid for interest $ 24 $ 24 Cash paid for income taxes $ - $ - The accompanying notes are an integral part of these consolidated financial statements. 27 Table of Contents PARKERVISION, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2023 and 2022 1. SIGNIFICANT ACCOUNTING POLICIES ParkerVision, Inc. and its wholly-owned German subsidiary, ParkerVision GmbH (collectively “ParkerVision”, “we” or the “Company”) is in the business of innovating fundamental wireless hardware technologies and products. We have determined that our business currently operates under a single operating and reportable segment. We have designed and developed proprietary radio frequency (“RF”) technologies and integrated circuits based on those technologies, and we license our technologies to others 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 a number of our RF patents. We have made significant investments in developing and protecting our technologies, the returns on which are dependent upon the generation of future revenues for realization. Basis of Presentation Our consolidated financial statements are prepared in accordance with generally accepted accounting principles in the U.S. (“GAAP”). Certain reclassifications have been made to prior period amounts to conform to the current period presentation. The consolidated financial statements include the accounts of ParkerVision, Inc. and our wholly-owned German subsidiary, ParkerVision GmbH, after elimination of all intercompany transactions and accounts. As of December 31, 2023, we are in the process of liquidating ParkerVision GmbH which will have no impact on the consolidated financial statements. Use of Estimates in the Preparation of Financial Statements The preparation of financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. The more significant estimates made by us include projected future cash flows and risk-adjusted discount rates for estimating the fair value of our contingent payment obligations, the volatility and estimated lives of share-based awards used in the estimate of the fair market value of share-based compensation, the assessment of recoverability of long-lived assets, the amortization periods for intangible and long-lived assets, and the valuation allowance for deferred taxes. Actual results could differ from the estimates made. We periodically evaluate estimates used in the preparation of the financial statements for continued reasonableness. Appropriate adjustments, if any, to the estimates used are made prospectively based upon such periodic evaluation. Cash and Cash Equivalents We consider cash and cash equivalents to include cash on hand, interest-bearing deposits, overnight repurchase agreements and investments with original maturities of three months or less when purchased. 28 Table of Contents Intangible Assets We capitalize outside legal costs and agency filing fees incurred in connection with securing the rights to our intellectual property. Patents, copyrights, and other intangible assets are amortized using the straight-line method over their estimated period of benefit. We estimate the economic lives of our patents and copyrights to be fifteen to twenty years. Management evaluates the recoverability of intangible assets periodically and considers events or circumstances that may warrant revised estimates of useful lives or that may indicate impairment exists. As part of our ongoing patent maintenance program, we will, from time to time, abandon a particular patent if we determine fees to maintain the patent exceed its expected recoverability. The cost and accumulated amortization of abandoned intangible assets are removed from their respective accounts, and any resulting net loss is recognized in selling, general and administrative expenses in the accompanying consolidated statements of comprehensive income (loss). Contingent Payment Obligations We have accounted for our secured and unsecured contingent payment obligations as long-term debt in accordance with Accounting Standards Codification (“ASC”) 470 - 10 - 25, “Sales of Future Revenues or Various other Measures of Income.” Our payment obligations are contingent upon the receipt of proceeds from patent enforcement and/or patent monetization actions. We have elected to measure our contingent payment obligations at their estimated fair values in accordance with ASC 825, “Financial Instruments” based on the variable and contingent nature of the repayment provisions. We have determined that the fair value of our secured and unsecured contingent payment obligations falls within Level 3 in the fair value hierarchy, which involves significant estimates, and assumptions including projected future patent-related proceeds and the risk-adjusted rate for discounting future cash flows (see Note 11 ). Actual results could differ from the estimates made. Changes in fair value, including the component related to imputed interest, are included in the accompanying consolidated statements of comprehensive income (loss) under the heading “Change in fair value of contingent payment obligations.” Leases We account for finance and operating leases in accordance with ASC 842, “Leases” which requires the recognition of lease right-of-use assets and lease liabilities on our consolidated balance sheets for finance and operating leases with initial lease terms of more than 12 months. No new finance or operating leases commenced during the years ended December 31, 2023 or 2022 . The impacts of leasing arrangements during the years ended December 31, 2023 and 2022 were not considered material. Revenue Recognition We account for revenue under ASC 606, “Revenue from Contracts with Customers” which implements a common revenue standard that clarifies the principles for recognizing revenue. This revenue recognition model provides a five -step analysis in determining when and how revenue is recognized. These steps include ( 1 ) identifying the contract with the customer, ( 2 ) identifying the performance obligations, ( 3 ) determining the transaction price, ( 4 ) allocating the transaction price to the performance obligations, and ( 5 ) recognizing revenue as the entity satisfies the performance obligation(s). Our revenue is derived from patent licensing and settlement agreements. We have an active monitoring and enforcement program with respect to our intellectual property rights that includes seeking appropriate compensation from third parties that utilize or have utilized our intellectual property without a license. As a result, we may receive payments as part of a settlement or in the form of court-awarded damages for a patent infringement dispute. The timing and amount of revenue recognized from each licensee depend upon a variety of factors, including the specific terms of each agreement and the nature of the deliverables and obligations. Such agreements are often complex and may include multiple performance obligations. These agreements can include performance obligations related to the settlement of past patent infringement liabilities, royalties on future covered products sold by licensees, access to a portfolio of technology as it exists at a point in time, and/or promises to provide technology updates to the portfolio during the term of the license. Refer to Note 3 for additional disclosures related to our revenue. 29 Table of Contents Cost of Sales Cost of sales includes amortization of intangible assets directly linked with revenue generating licensing activities. Amortization expense for intangible assets that are not directly related to revenue generating licensing activities are included in selling, general, and administrative expenses in our consolidated statements of comprehensive income (loss). As a result of the confidential patent license and settlement agreement reached in February 2023, all of our patents are now directly linked with revenue generating licensing activities and, therefore, amortization expense for all intangible assets is now recorded to cost of sales. Accounting for Share-Based Compensation We have various share-based compensation programs which provide for equity awards including stock options, restricted stock units (“RSUs”) and restricted stock awards (“RSAs”). We calculate the fair value of share-based equity awards on the date of grant and recognize the calculated fair value as compensation expense over the requisite service periods of the related awards. We estimate the fair value of stock option awards using the Black-Scholes option valuation model. This valuation model requires the use of highly subjective assumptions and estimates including how long employees will retain their stock options before exercising them and the volatility of our common stock price over the expected life of the equity award. Such estimates, and the basis for our conclusions regarding such estimates, are outlined in detail in Note 15. Estimates of fair value are not intended to predict actual future events or the value ultimately realized by persons who receive equity awards. We account for forfeitures of share-based awards as they occur. Income Taxes The provision for income taxes is based on income (loss) before taxes as reported in the accompanying consolidated statements of comprehensive income (loss). Deferred tax assets and liabilities are recognized for the expected future tax consequences of events that have been included in the financial statements or tax returns. Deferred tax assets and liabilities are determined based on differences between the financial statement carrying amounts and the tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Valuation allowances are established to reduce deferred tax assets when, based on available objective evidence, it is more likely than not that the benefit of such assets will not be realized. Our deferred tax assets exclude unrecognized tax benefits which do not meet a more-likely-than- not threshold for financial statement recognition for tax positions taken or expected to be taken in a tax return. 2. LIQUIDITY AND GOING CONCERN The accompanying consolidated financial statements as of and for the year ended December 31, 2023 were prepared assuming we will continue as a going concern, which contemplates that we will continue in operation and will be able to realize our assets and settle our liabilities and commitments in the normal course of business for a period of at least one year from the issuance date of these consolidated financial statements. These consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that could result should we be unable to continue as a going concern. With the exception of the year ended December 31, 2023 ,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 advanced technologies and protecting our intellectual property. We 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 to enforce our intellectual property rights. At December 31, 2023 , we had cash and cash equivalents of approximately $ 2.6 million, working capital of $ 0.4 million, and an accumulated deficit of approximately $ 433.7 million. 30 For the year ended December 31, 2023 , we recognized net income of approximately $ 9.5 million and cash flows from operations of approximately $ 10.8 million. The net income and related cash flows is a result of revenue from a patent license and settlement agreement, net of contingent legal fees. For the year ended December 31, 2023 , we made payments of $ 13.9 million on our secured contingent payment obligation, $ 0.1 million on a related party note, and $ 0.2 million upon the maturity of convertible notes. We received aggregate proceeds from new borrowings under our secured contingent payment obligation of $ 5.0 million and aggregate net proceeds from convertible debt and equity financings of approximately $ 0.9 million. These proceeds will be used to support our operations. Despite the net income and cash flows generated during the year ended December 31, 2023 , a significant amount of future proceeds that we may receive from our patent enforcement and licensing programs will first be utilized to repay borrowings, legal fees, and litigation expenses under our contingent funding arrangements. In addition, we have approximately $ 1.5 million in convertible debt that, if not converted, will mature between June 2024 and January 2025. 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 consolidated financial statements. Our business plan is currently focused solely on our patent enforcement and technology licensing objectives. The timing and amount of proceeds from our patent enforcement actions are difficult to predict and there can be no assurance we will receive any proceeds from these enforcement actions. Refer to Note 13 for a complete discussion of our patent enforcement proceedings. Significant portions of our litigation costs to date have been funded by contingent payment arrangements with legal counsel. Fee discounts offered by legal counsel in exchange for contingent payments upon successful outcome in our litigation are not recognized in expense until such time that the related proceeds on which the contingent fees are payable are considered probable. Contingent fees vary based on each firm’s specific fee agreement. We currently have contingent fee arrangements in place for all of our active cases. In addition to our contingent fee agreements with legal counsel, we have secured and unsecured contingent payment obligations that have priority payments due from patent-related proceeds. Our current capital resources are not sufficient to meet our liquidity needs for the next twelve months and we may be required to seek additional capital. Our ability to meet our 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, (iii) our ability to successfully negotiate extensions to the maturity date for certain convertible notes, and/or (iv) 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 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. 31 Table of Contents 3. REVENUE During the years ended December 31, 2023 and 2022 , we recognized $ 25.00 million and $ 0.93 million of revenue, respectively, derived from contracts with licensees. The contracts provide access to specified patented technologies as they exist at a point in time, and we have no obligation to provide any future updates. The consideration received by us was negotiated as part of a settlement of patent litigation where no prior license agreement existed. The performance obligations were satisfied upon our dismissal of patent enforcement actions with each licensee which was contingent upon our receipt of the negotiated and agreed-upon lump-sum payments from the licensees. The contracts included no variable consideration. All consideration received was recorded to licensing revenue as there were no other material components of the contracts. No contract assets or liabilities exist as of December 31, 2023 . 4. EARNINGS PER SHARE Basic earnings per common share is determined based on the weighted-average number of common shares outstanding during each period. Diluted loss per common share is the same as basic loss per common share for the year ended December 31, 2022, as all common share equivalents are excluded from the calculation, as their effect is anti-dilutive. The dilutive effect of outstanding options and warrants is calculated using the treasury stock method. The dilutive effect of shares underlying convertible notes was calculated using the if-converted method. The following table shows the computation of basic and diluted earnings (loss) per share for the years ended December 31, 2023 and 2022 (net income (loss) and shares in thousands): Year Ended December 31, 2023 2022 Numerator: Net income (loss) $ 9,515 $ ( 9,813 ) Effect of dilutive securities 402 - Net income (loss) adjusted for dilutive effect 9,917 ( 9,813 ) Denominator: Weighted-average basic shares outstanding 85,732 78,395 Effect of dilutive securities 34,156 - Weighted-average diluted shares 119,888 78,395 Basic earnings (loss) per share $ 0.11 $ ( 0.13 ) Diluted earnings (loss) per share $ 0.08 $ ( 0.13 ) 32 Table of Contents Diluted earnings per common share for the years ended December 31, 2023 and 2022 excludes options, warrants, and shares underlying convertible notes that are anti-dilutive. The anti-dilutive common share equivalents at December 31, 2023 and 2022 were as follows (in thousands): 2023 2022 Options outstanding 26,034 24,380 Warrants outstanding 10,346 10,346 Shares underlying convertible notes - 32,734 36,380 67,460 5. PREPAID EXPENSES Prepaid expenses consisted of the following at December 31, 2023 and 2022 (in thousands): 2023 2022 Prepaid services $ 31 $ 202 Prepaid insurance 12 25 Prepaid licenses, software tools and support 16 15 Other prepaid expenses 2 2 $ 61 $ 244 Prepaid services at December 31, 2022 include approximately $ 0.2 million of consulting services paid in shares of stock or warrants to purchase shares of stock in the future. There were no consulting services paid in shares of stock or warrants included in prepaid services at December 31, 2023. 6. INTANGIBLE ASSETS Intangible assets consisted of the following at December 31, 2023 and 2022 (in thousands): 2023 2022 Patents and copyrights $ 10,431 $ 14,319 Less accumulated amortization ( 9,376 ) ( 12,960 ) $ 1,055 $ 1,359 Amortization expense for the years ended December 31, 2023 and 2022 was approximately $ 0.25 million and $ 0.30 million, respectively. For the years ended December 31, 2023 and 2022 , we recorded losses on the disposal of intangible assets of approximately $ 0.06 million and $ 0.12 million, respectively. 33 Table of Contents Future estimated amortization expense for intangible assets that have remaining unamortized amounts as of December 31, 2023 is as follows (in thousands): 2024 $ 228 2025 193 2026 132 2027 115 2028 99 2029 and thereafter 288 Total $ 1,055 7. ACCRUED LIABILITIES Other accrued expenses consisted of the following at December 31, 2023 and 2022 (in thousands): 2023 2022 Advances $ 375 $ 425 Accrued interest 66 56 Other accrued expenses 6 9 $ 447 $ 490 Advances include amounts received from litigation counsel as advanced reimbursement of out-of-pocket expenses expected to be incurred by us. 8. NOTES PAYABLE Note Payable to a Related Party We have an unsecured promissory note payable of $ 0.5 million to Sterne, Kessler, Goldstein, & Fox, PLLC (“SKGF”), a related party (see Note 16 ), for outstanding unpaid fees for legal services. The note, as amended, accrues interest at 4 % per annum and provides for monthly payments of principal and interest of $ 12,500 with a final balloon payment of approximately $ 0.02 million due at the maturity date of April 30, 2027. We are currently in compliance with all the terms of the note, as amended. For the years ended December 31, 2023 and 2022 , we recognized interest expense of approximately $ 0.02 million and $ 0.03 million, respectively related to this note. At December 31, 2023 , the aggregate maturities of our notes payable are as follows (in thousands): 2024 $ 134 2025 139 2026 144 2027 57 Total $ 474 The estimated fair value of our notes payable at December 31, 2023 is approximately $ 0.39 million based on a risk-adjusted discount rate. 34 Table of Contents 9. CONVERTIBLE NOTES Our convertible notes represent promissory notes that are convertible, at the holders’ option, into shares of our common stock at fixed conversion prices. Interest payments are made on a quarterly basis and are payable, at our option and subject to certain equity conditions, in either cash, shares of our common stock, or a combination thereof. The number of shares issued for interest is determined by dividing the interest payment amount by the closing price of our common stock on the trading day immediately prior to the scheduled interest payment date. To date, all interest payments on the convertible notes have been made in shares of our common stock. We have recognized the convertible notes as debt in our consolidated financial statements. We have the option to prepay the majority of the notes any time following the one -year anniversary of the issuance of the notes, subject to a premium on the outstanding principal prepayment amount of 25 % prior to the two -year anniversary of the note issuance date, 20 % prior to the three -year anniversary of the note issuance date, 15 % prior to the four -year anniversary of the note issuance date, or 10 % thereafter. The notes provide for events of default that include failure to pay principal or interest when due, breach of any of the representations, warranties, covenants, or agreements made by us, events of liquidation or bankruptcy, and a change in control. In the event of default, the interest rate increases to 12 % per annum and the outstanding principal balance of the notes plus all accrued interest due may be declared immediately payable by the holders of a majority of the then outstanding principal balance of the notes. In September 2023, we issued a 2.5 -year, $ 0.1 million convertible note with a fixed conversion price of $ 0.25 per share to a Company director (see Note 16 ). In January 2023, we sold five -year convertible promissory notes for aggregate proceeds of $ 0.7 million and a conversion price of $ 0.16 per share (the "January 2023 Notes"). The shares underlying the January 2023 Notes, as well as shares reserved for future in-kind interest payments on the notes, were registered on a registration statement that was declared effective on May 11, 2023 ( File No. 333 - 271351 ). In 2022 we sold five -year convertible promissory notes for aggregate proceeds of $ 1.7 million and a conversion price of $ 0.13 per share. The shares underlying the notes, as well as shares reserved for future in-kind interest payments on the notes, were registered on a registration statement that was declared effective on August 22, 2022 ( File No. 333 - 266777 ). For the year ended December 31, 2023 , we repaid an aggregate of $ 0.2 million at maturity. For the years ended December 31, 2023 and 2022 , convertible notes with a face value of $ 0.2 million and $ 0.03 million, respectively, were converted by the holders into 1.5 million and 0.3 million shares of our common stock, respectively. On September 15, 2023, we amended convertible notes dated September 18, 2018, with an aggregate face value of $ 0.43 million. The conversion price of the notes was $ 0.57 per share and the original maturity date of the notes was September 18, 2023. The notes were amended to reduce the conversion price to $ 0.25 per share and extend the maturity date by 2.5 years, or until March 18, 2026. All other terms of the notes remain unchanged. Additionally, on September 15, 2023, we amended the convertible promissory notes dated February 28, 2019 and March 13, 2019 with an aggregate face value of $ 0.75 million to extend the maturity dates from February 28, 2024 and March 13, 2024 to February 28, 2026 and March 13, 2026, respectively. All other terms of the notes, including the $ 0.25 fixed conversion price, remain unchanged. As a result of these modifications, the notes were considered to be modified under a troubled debt restructuring in accordance with ASC 470 - 60. No gain or loss was recognized as a result of the restructurings. At the holders’ option, subject to ownership limitations, the convertible notes outstanding at December 31, 2023 could be converted into an aggregate of approximately 36.4 million shares of our common stock based on the fixed conversion prices. With the exception of the shares underlying the September 15, 2023 note to a related party, all of the shares underlying our convertible notes, including shares reserved for future in-kind interest payments on the notes, have been registered for resale. For the years ended December 31, 2023 and 2022 , we recognized interest expense of approximately $ 0.4 million and $ 0.3 million, respectively. We have elected to pay contractual interest in shares of our common stock. For the years ended December 31, 2023 and 2022 , we issued approximately 3,336,000 and 1,203,000 shares of our common stock, respectively, as interest-in-kind payments on our convertible notes. 35 Table of Contents Convertible notes payable at December 31, 2023 and 2022 , consist of the following (in thousands): Fixed Conversion Interest December 31, Description Rate Rate Maturity Date 2023 2022 Convertible notes dated September 10, 2018 $ 0.40 8.0 % September 7, 2023 $ - $ 200 Convertible notes dated September 18, 2018 $ 0.25 1 8.0 % March 18, 2026 1 425 425 Convertible notes dated February/March 2019 $ 0.25 8.0 % February 28, 2026 to March 13, 2026 2 750 750 Convertible notes dated June/July 2019 $ 0.10 8.0 % June 7, 2024 to July 15, 2024 295 295 Convertible notes dated July 18, 2019 $ 0.08 7.5 % July 18, 2024 700 700 Convertible notes dated September 13, 2019 $ 0.10 8.0 % September 13, 2024 50 50 Convertible notes dated January 8, 2020 $ 0.13 8.0 % January 8, 2025 3 450 450 Convertible notes dated May-August 2022 $ 0.13 8.0 % May 10, 2027 to August 3, 2027 1,468 1,668 Convertible note dated January 11, 2023 $ 0.16 9.0 % January 11, 2028 3 500 - Convertible notes dated January 13, 2023 $ 0.16 9.0 % January 13, 2028 200 - Convertible note dated September 15, 2023 $ 0.25 8.0 % March 15, 2026 100 - Total principal balance 4,938 4,538 Less current portion 1,045 625 $ 3,893 $ 3,913 1 These notes were amended on September 15, 2023, reducing the conversion rate from $ 0.57 per share to $ 0.25 per share and extending the maturity date from September 18, 2023 to March 18, 2026. The amendments are accounted for on a prospective basis in accordance with ASC 470 - 60. 2 These notes were amended on September 15, 2023, extending the maturity date from February 28, 2024 through March 13, 2024 to February 28, 2026 through March 13, 2026. The amendments are accounted for on a prospective basis in accordance with ASC 470 - 60. 3 The maturity date may be extended by one -year increments for up to an additional ten years at the holder’s option at a reduced interest rate of 2 %. At December 31, 2023 , we estimate our convertible notes have an aggregate fair value of approximately $ 3.7 million and would be categorized within Level 2 of the fair value hierarchy. 36 Table of Contents 10. CONTINGENT PAYMENT OBLIGATIONS Secured Contingent Payment Obligation The following table provides a reconciliation of our secured contingent payment obligation measured at estimated fair market value for the years ended December 31, 2023 and 2022 , respectively (in thousands): 2023 2022 Secured contingent payment obligation, beginning of year $ 40,708 $ 37,372 Proceeds from contingent payment obligation 5,000 - Repayment ( 13,925 ) - Change in fair value ( 2,381 ) 3,336 Secured contingent payment obligation, end of year $ 29,402 $ 40,708 Our secured contingent payment obligation represents the estimated fair value of our repayment obligation to Brickell Key Investments, LP (“Brickell”) under a February 2016 funding agreement, as amended from time to time. On August 14, 2023, the contingent funding agreement with Brickell was replaced with a secured, non-recourse note (the "Note") and a prepaid forward purchase agreement (the "PPFPA"). The Note has a face value of $ 45.5 million ("Face Value"), accrues simple interest at a fixed rate, and matures on August 14, 2028. Payments under the Note will be made solely from proceeds from our patent assets, net of contingent fees payable to attorneys ("Distributions"). We are obligated to pay one hundred percent ( 100 %) of the first $ 5.8 million in Distributions to Brickell, and thereafter will pay a percentage of Distributions, which varies depending upon the origin of the Distributions, until the Face Value of the Note, and accrued interest thereon, has been repaid in full. If the amounts payable to Brickell from Distributions are insufficient to repay the face value and interest accrued on the Note by the maturity date, our remaining repayment obligations under the Note will be reduced to zero with future payment obligations, if any, being determined under the PPFPA. The Note is secured by our patent assets and related proceeds and contains standard and customary representations, warranties and covenants. The Note contains events of default including, but not limited to, (a) failure to pay principal or interest on the Note when due; (b) breach of representations or covenants, (c) impairment in the perfection or priority of Brickell's security interests in the collateral, and (d) bankruptcy or dissolution of the Company. In the event of a default, the outstanding principal and accrued interest on the Note will become immediately due and payable. The PPFPA extends beyond the maturity date of the Note and provides that Brickell is entitled to a specified percentage of monetary recoveries resulting from our patent-related actions to the extent not already paid to Brickell under the Note, or otherwise prior to the inception of the Note. The PPFPA also contains standard and customary representations, warranties and covenants. The Note and PPFPA are collectively referred to as our secured contingent payment obligation. To date, we have received aggregate proceeds of $ 23 million in exchange for Brickell’s right to reimbursement and compensation from gross proceeds resulting from patent enforcement and other patent monetization actions and have repaid an aggregate of $ 17.3 million from patent license and settlement proceeds. The underlying carrying value of the Note, which includes the Face Value plus accrued interest, was approximately $ 51.0 million as of December 31, 2023, which compares to the minimum return due to Brickell under the prior agreement of $ 56.9 million as of December 31, 2022. The range of potential proceeds payable to Brickell is discussed more fully in Note 11. Brickell holds a senior security interest in the majority of our assets until such time as the Note, including accrued interest thereon, is paid in full. The security interest is enforceable by Brickell in the event that we are in default under the agreement which would occur if (i) we fail, after notice, to pay proceeds to Brickell, (ii) we become insolvent or insolvency proceedings are commenced (and not subsequently discharged) with respect to us, (iii) our creditors commence actions against us (which are not subsequently discharged) that affect our material assets, (iv) we, without Brickell’s consent, incur indebtedness other than immaterial ordinary course indebtedness, or (v) there is an uncured non-compliance of our obligations or misrepresentations under the agreement. As of December 31, 2023 , we are in compliance with our obligations under this agreement. 37 Table of Contents We have elected to measure our secured contingent payment obligation at its estimated fair value based on probability-weighted estimated cash outflows, discounted back to present value using a discount rate determined in accordance with accepted valuation methods (see Note 11 ). The secured contingent payment obligation is remeasured to fair value at each reporting period with changes recorded in the consolidated statements of comprehensive income (loss) until the contingency is resolved. Unsecured Contingent Payment Obligations The following table provides a reconciliation of our unsecured contingent payment obligations, measured at estimated fair market value, for the years ended December 31, 2023 and 2022 , respectively (in thousands): 2023 2022 Unsecured contingent payment obligations, beginning of year $ 5,089 $ 5,691 Change in fair value 2,529 ( 602 ) Unsecured contingent payment obligations, end of year $ 7,618 $ 5,089  Our unsecured contingent payment obligations represent amounts payable to others from future patent-related proceeds including (i) a termination fee due to a litigation funder (“Termination Fee”) and (ii) contingent payment rights (“CPRs”) issued to accredited investors primarily in connection with equity financings. We have elected to measure these unsecured contingent payment obligations at their estimated fair value based on probability-weighted estimated cash outflows, discounted back to present value using a discount rate determined in accordance with accepted valuation methods. The unsecured contingent payment obligations will be remeasured to fair value at each reporting period with changes recorded in the consolidated statements of comprehensive income (loss) until the contingency is resolved (see Note 11 ).  The Termination Fee is a result of $ 1.0 million in advances received under a letter agreement with a third -party funder. Based on the terms of the letter agreement, if a final funding arrangement was not executed by March 31, 2020, we would be obligated to pay, from future patent-related proceeds, an aggregate termination payment equal to five times the advances received, or approximately $ 5.0 million. We did not consummate a funding agreement and accordingly the advances were recorded as an unsecured contingent payment obligation at March 31, 2020, when the Termination Fee obligation was incurred. As of December 31, 2023 , the estimated fair value of unsecured contingent payment obligations related to the Termination Fee is $ 3.5 million. The CPRs represent the estimated fair value of rights provided to accredited investors who purchased shares of our common stock in 2020 and 2021 and the fair value of a right issued to a third -party in connection with a service agreement during the year ended December 31, 2020. No sales of common stock with contingent payment rights were completed during the years ended December 31, 2023 and 2022 . The terms of the CPRs provide that we will pay each investor an allocated portion of our net proceeds from patent-related actions, after taking into account fees and expenses payable to law firms representing us and amounts payable to Brickell. The investors’ allocated portion of net proceeds will be determined by multiplying the net proceeds recovered by us (up to $ 10 million) by the quotient of such investors’ subscription amount divided by $ 10 million, up to an amount equal to each investor’s subscription amount, or an aggregate of $ 5.8 million. As of December 31, 2023 , the estimated fair value of our unsecured contingent payment obligations related to the CPRs is $ 4.1 million. 38 Table of Contents 11. FAIR VALUE MEASUREMENTS ASC 820, “Fair Value Measurements” establishes a fair value hierarchy that prioritizes the inputs to valuation methods used to measure fair value. The three levels of the fair value hierarchy are as follows: ● Level 1: Quoted prices for identical assets or liabilities in active markets which we can access ● Level 2: Observable inputs other than those described in Level 1 ● Level 3: Unobservable inputs The following table summarizes financial assets and financial liabilities carried at fair value and measured on a recurring basis as of December 31, 2023 and 2022 , segregated by classification within the fair value hierarchy (in thousands): Fair Value Measurements Total Quoted Prices in Active Markets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) December 31, 2023: Liabilities: Secured contingent payment obligation $ 29,402 $ - $ - $ 29,402 Unsecured contingent payment obligations 7,618 - - 7,618 December 31, 2022: Liabilities: Secured contingent payment obligation 40,708 - - 40,708 Unsecured contingent payment obligations 5,089 - - 5,089 For the years ended December 31, 2023 and 2022 , respectively, we had no transfers of assets or liabilities between the levels of the hierarchy. The fair values of our secured and unsecured contingent payment obligations were estimated using a probability-weighted income approach based on various cash flow scenarios as to the outcome of patent-related actions both in terms of timing and amount, discounted to present value using a risk-adjusted rate. We used a risk-adjusted discount rate for the secured and unsecured contingent payment obligations of 18.12 % and 18.51 %, respectively, at December 31, 2023 , based on a risk-free rate of 4.12 % and 4.51 %, respectively, as adjusted by 8 % for credit risk and 6 % for litigation inherent risk. 39 Table of Contents The following table provides quantitative information about the significant unobservable inputs used in the measurement of fair value for both the secured and unsecured contingent payment obligations at December 31, 2023 , including the lowest and highest undiscounted payout scenarios as well as a weighted average payout scenario based on relative undiscounted fair value of each cash flow scenario. Secured Contingent Payment Obligation Unsecured Contingent Payment Obligations Unobservable Inputs Low Weighted Average High Low Weighted Average High Estimated undiscounted cash outflows (in millions) $ 0.0 $ 43.1 $ 79.6 $ 0.0 $ 9.7 $ 10.8 Duration (in years) 0.5 2.3 3.5 0.5 1.4 3.5 Estimated probabilities 5 % 20 % 35 % 5 % 23 % 35 % We evaluate the estimates and assumptions used in determining the fair value of our contingent payment obligations each reporting period and make any adjustments prospectively based on those evaluations. Changes in any of these Level 3 inputs could result in a significantly higher or lower fair value measurement. 12. INCOME TAXES AND TAX STATUS Our net income (loss) before income tax for the years ended December 31, 2023 and 2022 are from domestic operations as well as losses from our wholly-owned German subsidiary. We elected to treat our German subsidiary as a disregarded entity for purposes of income taxes and accordingly, the losses from our German subsidiary have been included in our operating results. No current or deferred tax provision was recorded in 2023 as a result of net operating loss ("NOL") carryforwards not previously recognized as a tax benefit that we expect to be able to utilize in the current year to offset income tax expense related to current period income. No current or deferred tax benefit was recorded in 2022 as a result of current losses and fully deferred tax valuation allowances. We have recorded a valuation allowance to state our remaining deferred tax assets at their estimated net realizable value due to the uncertainty related to realization of these assets through future taxable income. A reconciliation between the provision for income taxes and the expected tax benefit using the federal statutory rate of 21 % for each of the years ended December 31, 2023 and 2022 , respectively are as follows (in thousands): 2023 2022 Tax expense (benefit) at statutory rate $ 1,998 $ ( 2,061 ) State tax expense (benefit) 409 ( 422 ) (Decrease) increase in valuation allowance ( 2,512 ) 2,416 Other 105 67 $ - $ - 40 Table of Contents Our deferred tax assets and liabilities relate to the following sources and differences between financial accounting and the tax bases of our assets and liabilities at December 31, 2023 and 2022 (in thousands): 2023 2022 Gross deferred tax assets: Net operating loss carry-forward $ 70,159 $ 75,470 Research and development credit carry-forward 4,565 5,356 Stock compensation 1,350 1,127 Patents and other 568 1,482 Contingent payment obligations 7,071 7,033 Fixed assets ( 1 ) ( 2 ) Charitable contributions 2 - Lease liabilities - 1 83,714 90,467 Less valuation allowance ( 83,714 ) ( 90,467 ) Net deferred tax asset $ - $ - At December 31, 2023 , we had cumulative NOL carry-forwards for income tax purposes of $ 279.8 million, of which $ 239.1 million is subject to expiration in varying amounts from 2024 to 2037. At December 31, 2023 , we also had research and development tax credit carryforwards of $ 4.6 million, which expire in varying amounts from 2024 through 2038. Our ability to benefit from the NOL and tax credit carry-forwards could be limited under certain provisions of the Internal Revenue Code if there are ownership changes of more than 50%, as defined by Section 382 of the Internal Revenue Code of 1986 (“Section 382” ). Under Section 382, an ownership change may limit the amount of NOL, capital loss and R&D credit carry-forwards that can be used annually to offset future taxable income and tax, respectively. In general, an ownership change, as defined by Section 382, results from transactions increasing the ownership of certain shareholders or public groups in the stock of a corporation by more than 50 percentage points over a three -year period. We conduct a study annually of our ownership changes. Based on the results of our studies, we have determined that we do not have any ownership changes on or prior to December 31, 2023 which would result in limitations of our NOL, capital loss or R&D credit carry-forwards under Section 382. Uncertain Tax Positions We file income tax returns in the U.S. federal jurisdiction, various state jurisdictions, and Germany. We have identified our Federal and Florida tax returns as our only major jurisdictions, as defined. The periods subject to examination for those returns are the 2004 through 2023 tax years. The following table provides a reconciliation of our unrecognized tax benefits due to uncertain tax positions for the years ended December 31, 2023 and 2022 , respectively (in thousands): 2023 2022 Unrecognized tax benefits – beginning of year $ 638 $ 653 Reduction as a result of lapse of statute of limitations - ( 15 ) Unrecognized tax benefits – end of year $ 638 $ 638 Future changes in the unrecognized tax benefit will have no impact on the effective tax rate so long as we maintain a full valuation allowance. 41 Table of Contents Our policy is that we recognize interest and penalties accrued on any unrecognized tax benefits as a component of our income tax expense. We do not have any accrued interest or penalties associated with any unrecognized tax benefits. For the years ended December 31, 2023 and 2022 , we did not incur any income tax-related interest income, expense or penalties. 13. COMMITMENTS AND CONTINGENCIES Legal Proceedings From time to time, we are subject to legal proceedings and claims which arise in the ordinary course of our business. These proceedings include patent enforcement actions initiated by us against others for the infringement of our technologies, as well as proceedings brought by others against us at the Patent Trial and Appeal Board of the U.S. Patent and Trademark Office (“PTAB”) in an attempt to invalidate certain of our patent claims. The majority of our litigation, including our PTAB proceedings, is being paid for through contingency fee arrangements with our litigation counsel as well as third -party litigation financing. In general, litigation counsel is entitled to recoup on a priority basis, from litigation proceeds, any out-of-pocket expenses incurred. Following reimbursement of out-of-pocket expenses, litigation counsel is generally entitled to a percentage of remaining proceeds based on the terms of the specific arrangement between us, counsel and our third -party litigation funder. ParkerVision v. Qualcomm (Middle District of Florida-Orlando Division) - Appealed to U.S. Court of Appeals for the Federal Circuit In March 2022, the district court ruled on a number of pre-trial motions in our patent infringement case against Qualcomm. The court granted Qualcomm motions to strike and exclude opinions regarding the alleged infringement and validity issues, essentially precluding infringement and validity opinions by both of our experts at trial. The court also issued an order granting Qualcomm’s motion for summary judgment ruling that Qualcomm did not infringe the remaining three patents in the case. In April 2022, we filed a notice of appeal to the United States Court of Appeals for the Federal Circuit. A hearing was held on our appellate action on November 6, 2023, and we are currently awaiting a ruling from the Federal Circuit. This patent infringement case was originally filed in the Middle District of Florida in May 2014. The case was stayed in February 2016 pending decisions in other cases, including the appeal of a PTAB proceeding with regard to U.S. patent 6,091,940 (“the ‘940 Patent”) asserted in this case. In March 2017, the PTAB ruled in our favor on three of the six petitions (the method claims), ruled in Qualcomm’s favor on two of the six petitions (the apparatus claims) and issued a split decision on the claims covered in the sixth petition. In September 2018, the Federal Circuit upheld the PTAB’s decision with regard to the ‘940 Patent and, in January 2019, the court lifted the stay in this case. In July 2019, the court issued an order that granted our proposed selection of patent claims from four asserted patents, including the ‘940 Patent, and denied Qualcomm’s request to limit the claims and patents. The court also agreed that we may elect to pursue accused products that were at issue at the time the case was stayed, as well as new products that were released by Qualcomm during the pendency of the stay. In September 2019, Qualcomm filed a motion for partial summary judgment in an attempt to exclude certain patents from the case, including the ‘940 Patent. The court denied this motion in January 2020. In April 2020, the court issued its claim construction order in which the court adopted our proposed construction for seven of the ten disputed terms and adopted slightly modified versions of our proposed construction for the remaining terms. Due to the impact of COVID- 19, a number of the scheduled deadlines in this case were moved including the trial commencement date which was rescheduled from December 2020 to May 2021. In October 2020, our damages expert submitted a report supporting our damages ask of $ 1.3 billion for Qualcomm’s unauthorized use of our technology. Such amount excludes additional amounts requested by us for interest and enhanced damages for willful infringement. Ultimately, the amount of damages, if any, will be determined by the court. Discovery was expected to close in December 2020; however, the court allowed us to designate a substitute expert due to medical issues with one of our experts in the case. Accordingly, the close of discovery was delayed until January 2021. As a result of these delays, the court rescheduled the trial commencement date from May 3, 2021 to July 6, 2021. 42 Table of Contents In March 2021, the court further delayed the trial date citing backlog due to the pandemic, among other factors. A new trial date was not set and the court indicated the case was unlikely to be tried before November or December 2021. Fact and expert discovery was completed, expert reports were submitted, and summary judgment and Daubert briefings were submitted by the parties. Joint pre-trial statements were submitted in May 2021. In March 2021, the court granted Qualcomm’s motion to strike certain of our 2020 infringement contentions. As a result of this ruling, in July 2021, we filed a joint motion for entry of a judgment of non-infringement of our Patent No. 7,865,177 (“the ‘177 Patent”), subject to appeal. In January 2022, the court held a hearing to allow the parties to present their respective positions on three outstanding motions. In March 2022, the district court rulings in favor of Qualcomm closed the district court case, subject to our appeal. 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. We are represented in this case on a full contingency fee basis. ParkerVision v. Apple and Qualcomm (Middle District of Florida-Jacksonville Division) In December 2015, we filed a patent infringement complaint in the Middle District of Florida against Apple Inc. (“Apple”), LG Electronics, Inc., LG Electronics U.S.A., Inc., and LG Electronics MobileComm U.S.A., Inc. (collectively “LG”), Samsung Electronics Co. Ltd., Samsung Electronics America, Inc., Samsung Telecommunications America LLC, and Samsung Semiconductor, Inc. (collectively “Samsung”), and Qualcomm alleging infringement of four of our patents. In February 2016, the district court proceedings were stayed pending resolution of a corresponding case filed at the International Trade Commission (“ITC”). In July 2016, we entered into a patent license and settlement agreement with Samsung and, as a result, Samsung was dismissed from the district court action. In March 2017, we filed a motion to terminate the ITC proceedings and a corresponding motion to lift the stay in the district court case. This motion was granted in May 2017. In July 2017, we filed a motion to dismiss LG from the district court case and re-filed our claims against LG in the District of New Jersey (see ParkerVision v. LG below). Also in July 2017, Qualcomm filed a motion to change venue to the Southern District of California, and Apple filed a motion to dismiss for improper venue. In March 2018, the district court ruled against the Qualcomm and Apple motions. The parties also filed a joint motion in March 2018 to eliminate three of the four patents in the case in order to expedite proceedings leaving our U.S. patent 9,118,528 as the only remaining patent in this case. A claim construction hearing was held on August 31, 2018. In July 2019, the court issued its claim construction order in which the court adopted our proposed claim construction for two of the six terms and the “plain and ordinary meaning” on the remaining terms. In addition, the court denied a motion filed by Apple for summary judgment. Fact discovery has closed in this case and a jury trial was scheduled to begin in August 2020. In March 2020, as a result of the impact of COVID- 19, the parties filed a motion requesting an extension of certain deadlines in the case. In April 2020, the court stayed this proceeding pending the outcome of the infringement case against Qualcomm in the Orlando Division of the Middle District of Florida, which is currently pending an appeal. ParkerVision v. LG (District of New Jersey) In July 2017, we filed a patent infringement complaint in the District of New Jersey against LG for the alleged infringement of four patents previously asserted against LG in the Middle District of Florida (see ParkerVision v. Apple and Qualcomm above). We elected to dismiss the case in the Middle District of Florida and re-file in New Jersey as a result of a Supreme Court ruling regarding proper venue. In March 2018, the court stayed this case pending a final decision in ParkerVision v. Apple and Qualcomm in the Middle District of Florida. As part of this stay, LG has agreed to be bound by the final claim construction decision in that case. ParkerVision v. Intel (Western District of Texas) We filed two patent infringement complaints in the Western District of Texas against Intel Corporation (“Intel”) in 2020, alleging infringement of approximately ten of our patents by Intel cellular, WiFi and Bluetooth products. The first case was scheduled for trial commencing February 6, 2023. Beginning in November 2022, the parties filed a number of pre-trial motions. The court held hearings on these pre-trial motions in January 2023. The court issued its written orders with regard to these motions immediately prior to the February 6, 2023 trial start date. As a result of the court's pre-trial rulings, the potential damages in the case decreased significantly. On February 7, 2023, the parties resolved their outstanding dispute and we dismissed all pending actions against Intel. 43 Table of Contents ParkerVision v. TCL (Western District of Texas) We filed two patent infringement actions in the Western District of Texas in 2020 and 2021 against TCL Industries Holdings Co., Ltd, a Chinese company, TCL Electronics Holdings Ltd., Shenzhen TCL New Technology Co., Ltd, TCL King Electrical Appliances (Huizhou) Co., Ltd., TCL Moka Int’l Ltd. and TCL Moka Manufacturing S.A. DE C.V. (collectively “TCL”) alleging infringement of approximately twelve of our patents. The court issued its claim construction recommendations in the first TCL case, adopting our claim constructions in for nearly all of the disputed terms. In January 2023, the TCL action was stayed pending final resolution of patent infringement actions filed against Realtek, the manufacturer of the integrated circuits used in TCL's alleged infringing products. ParkerVision v. LGE (Western District of Texas) We filed a patent infringement action in the Western District of Texas against LG Electronics, a South Korean company ("LGE") in 2021, alleging infringement of ten of our patents. The court issued its claim construction recommendations in June 2022, adopting our claim constructions for nearly all of the disputed terms. In January 2023, the LGE action was stayed pending final resolution of patent infringement actions filed against Realtek and MediaTek as well as final resolution of IPR actions against patents in this case. ParkerVision v. Realtek (Western District of Texas) We filed two patent infringement actions in the Western District of Texas against Realtek Semiconductor Corp. ("Realtek"), the first in 2022 and a second in 2023, alleging infringement of an aggregate of seven of our patents. A claim construction hearing was held in January 2024 in the first Realtek action and the court adopted the majority of our claim constructions. A jury trial for the first Realtek action is currently scheduled for January 2025. ParkerVision v. MediaTek (Western District of Texas) We filed three patent infringement actions in the Western District of Texas against MediaTek Inc. and MediaTek USA Inc. (collectively, "MediaTek"), the first in 2022 and two additional cases in 2023, alleging infringement of an aggregate of ten of our patents. A claim construction hearing was held in January 2024 in the first MediaTek action and the court adopted the majority of our claim constructions. A jury trial for the first MediaTek action is currently scheduled for December 2024. The second MediaTek action has a tentative claim construction hearing date scheduled for May 2024 and jury trial in October 2025. ParkerVision v. Texas Instruments (Western District of Texas) We filed a patent infringement action in the Western District of Texas against Texas Instruments ("TI") in 2023, alleging infringement of three of our patents. In December 2023, TI filed a motion to change venue to the Northern District of Texas. A ruling has not yet been issued on this motion. A claim construction hearing is tentatively scheduled for May 2024 with a jury trial scheduled in May 2025. ParkerVision v. NXP Semiconductors (Western District of Texas) We filed a patent infringement action in the Western District of Texas against NXP Semiconductors ("NXP") in 2023, alleging infringement of three of our patents. A claim construction hearing is tentatively scheduled for May 2024 with a jury trial scheduled in August 2025. Additional Patent Infringement Cases – Western District of Texas ParkerVision filed a number of patent cases in the Western District of Texas in 2020 including cases against (i) Hisense Co., Ltd. and Hisense Visual Technology Co., Ltd (collectively “Hisense”), a Chinese company, (ii) Buffalo Inc., a Japanese company (“Buffalo”) and (iii) Zyxel Communications Corporation, a Chinese multinational electronics company headquartered in Taiwan, (“Zyxel”). Each case alleged infringement of the same ten patents by products that incorporate modules containing certain WiFi semiconductors manufactured by Realtek and/or MediaTek. We dismissed the actions against Buffalo and Zyxel in 2021 following satisfaction of the parties' obligations under patent license and settlement agreements. In November 2022, we dismissed two cases against Hisense following satisfaction of the parties' obligations under a patent license and settlement agreement. 44 Table of Contents Intel (USPTO) v. ParkerVision (PTAB) Intel filed IPR petitions against U.S. patent 7,539,474 (“the ‘474 Patent”), U.S. patent 7,110,444 ("the ‘444 Patent"), and U.S. patent 8,190,108 (“the ‘108 patent”) which were all patents asserted in ParkerVision v. Intel in the Western District of Texas. In January 2022, the PTAB issued its final decision for the '474 Patent, ruling in our favor with respect to the seven challenged claims. In January 2022, the PTAB also issued its final decision for the '444 Patent, determining that the single challenged claim of the '444 Patent was unpatentable. In July 2022, we appealed the PTAB decision on the '444 Patent to the Federal Circuit and in December 2023, the appellate court issued its written opinion affirming the PTAB's decision. In June 2022, the PTAB issued its final decision for the '108 Patent, determining that the challenged claims of the '108 Patent were unpatentable. We appealed this decision and anticipate a hearing date on our appeal by April 2024. Following our February 2023 resolution of the infringement actions against Intel, Intel withdrew from the IPR cases; however the U.S. Patent and Trademark Office ("USPTO") has exercised its right to intervene to defend the PTAB's decisions.  TCL and LGE. v. ParkerVision (PTAB) TCL, along with Hisense, filed IPR petitions against U.S. patent 7,292,835 (“the ‘835 Patent”) and the ‘444 Patent, both of which were asserted in the infringement cases against these parties in the Western District of Texas. In December 2021, LGE filed nearly identical petitions against the same two patents along with a joinder motion requesting to join the existing petitions, which was granted by the PTAB in April 2022. Oral hearings for these IPRs were held in September 2022. As part of a patent license and settlement agreement entered into with Hisense in November 2022, Hisense withdrew its participation in these IPR proceedings. In November 2022, the PTAB issued its written decision ruling that the challenged claims for both patents were unpatentable. We have appealed these decisions and anticipate hearing dates on our appeal by April 2024. MediaTek v. ParkerVision (PTAB) MediaTek filed an IPR petition in November 2023 against the ‘835 Patent which is one of the patents asserted in the first MediaTek infringement action. This matter is still being briefed by the parties. 14. STOCK AUTHORIZATION AND ISSUANCE Preferred Stock We have 15 million shares of preferred stock authorized for issuance at the direction of our board of directors (the “Board”). On November 17, 2005, our Board designated 0.1 million shares of authorized preferred stock as the Series E Preferred Stock in conjunction with its adoption of a Shareholder Protection Rights Agreement that expired in November 2023. As of December 31, 2023 , we had no outstanding preferred stock. Common Stock We have 175 million shares of common stock authorized for issuance as of December 31, 2023 . Our shareholders approved amendments to our articles of incorporation in September 2022 increasing the number of our authorized shares of common stock from 150 million to 175 million shares. As of December 31, 2023 , we have 36.4 million shares reserved for issuance under outstanding warrants and options and 36.4 million shares reserved for issuance upon conversion of our outstanding convertible notes. In addition, we have 1.1 million shares reserved for future issuance under equity compensation plans and 1.4 million shares reserved for future issuance upon payment of interest in-kind on our convertible notes.  45 Table of Contents Stock and Warrant Issuances – Equity Based Financings The following table presents a summary of completed equity-based financing transactions for the years ended December 31, 2023 and 2022 (in thousands, except for per share amounts): Date Transaction # of Common Shares/ Units Sold Average Price per Share/ Unit Net Proceeds (1) November 2022 Private placement of common stock 1,000 $ 0.20 $ 200 December 2022 Private placement of common stock 1,000 $ 0.20 $ 200 January 2023 Private placement of common stock 844 $ 0.16 $ 120 ( 1 ) After deduction of applicable offering costs. Private Placements In January 2023, we entered into securities purchase agreements with accredited investors for the sale of an aggregate of 843,750 shares of our common stock at a price of $ 0.16 per share for aggregate gross proceeds of $ 0.14 million, including 62,500 shares to Sanford Litvack, a member of our Board of Directors. The shares were registered for resale on a registration statement that was declared effective on May 11, 2023 ( File No. 333 - 271651 ). In November and December 2022, we entered into securities purchase agreements with accredited investors for the sale of 2,000,000 shares of our common stock at a price of $ 0.20 per share for aggregate proceeds of $ 0.4 million. The shares were registered for resale on a registration statement that was declared effective on May 11, 2023 ( File No. 333 - 271351 ). Stock, Option and Warrant Issuances – Payment for Services In April 2023, we entered into a consulting services agreement with Lewis Titterton to provide short-term advisory services to our chief executive officer in connection with the restructuring of the Brickell funding agreements. As consideration for services under the agreement, we issued 250,000 unregistered shares of our common stock valued at approximately $ 0.03 million. The consideration was recognized fully in the second quarter of 2023, prior to Mr. Titterton being appointed to the Board (see Note 16 ). In January 2023, we extended a prior consulting agreement with Intro-Act to provide research and shareholder relations services. We issued 75,000 shares of unregistered common stock valued at approximately $ 0.02 million as consideration for services to be provided during the first quarter of 2023. The agreement had been previously extended in August 2022 with the issuance of 150,000 shares of unregistered common stock valued at approximately $ 0.03 million as consideration for services provided over a six -month term. On November 22, 2022, we entered into an agreement with a third party to provide consulting services. As consideration for services provided under the twelve -month term of the agreement, we issued non-plan options to purchase 200,000 shares of unregistered common stock at an exercise price of $ 0.21 per share valued at approximately $ 0.03 million. The options vest in four equal three -month increments beginning November 22, 2022 and will expire three years from the date of the grant. The value of the stock issued was recognized as a consulting expense over the term of the agreement. The shares underlying the options were registered on a registration statement that was declared effective May 11, 2023 ( File No. 333 - 271651 ). 46 Table of Contents In October 2022, we entered into an agreement with Tailwinds Research Group LLC (“Tailwinds”) to provide continuing digital marketing services to us through December 2024. As consideration for services to be provided under the term of the agreement, we extended the expiration date for warrants previously issued to Tailwinds in 2020 under a prior services agreement. The warrants allow for the purchase of up to 200,000 shares of our common stock at an exercise price of $ 1.00 per share and the expiration date was extended from March 2023 to March 2026. The fair value of the modification of the warrants was valued at approximately $ 0.02 million using the Black-Scholes method. The expense was being recognized ratably over the term of the new agreement. In June 2023, we terminated the services agreement and recognized all remaining unamortized expense. In addition, from time to time, we issue share-based compensation awards under our equity compensation plans to third -party consultants. During the year ended December 31, 2023, we issued an aggregate of 170,000 RSAs valued at approximately $ 0.05 million under our 2019 Long-Term Equity Incentive Plan to two non-employees as compensation under consulting agreements. (See Note 15 ). Common Stock Warrants On December 18, 2023, we modified a 2018 warrant agreement with Brickell for the purchase of up to 3.0 million shares of our common stock at $ 0.16 per share. The modification provides for the extension of the expiration date of the outstanding warrants by 18 months, from December 20, 2023, to June 20, 2025. All other terms of the warrant agreement remain unchanged, including a call provision whereby if the closing price of our common stock for any period of five ( 5 ) consecutive trading days exceeds two times the exercise price, then we can call for the cancellation of all or a portion of the warrants for which a notice of exercise has not been delivered within five ( 5 ) trading days of our delivery of a call notice to Brickell. The modification resulted in an increase in the fair value of the warrants of $ 0.3 million, which was recorded as an increase in additional paid in capital and an increase in deferred offering costs, included in other assets, in the accompanying consolidated financial statements at December 31, 2023. We had outstanding warrants for the purchase of up to 10.3 million shares of our common stock as of December 31, 2023 and 2022 . The estimated grant date fair value of these warrants of $ 3.5 million and $ 3.2 million for the years ended December 31, 2023 and 2022, respectively, is included in shareholders’ deficit in our consolidated balance sheets. As of December 31, 2023 , our outstanding warrants have an average exercise price of $ 0.75 per share and a weighted average remaining life of approximately 1.5 years. 15. SHARE-BASED COMPENSATION For the years ended December 31, 2023 and 2022 , we recognized share-based compensation expense of approximately $ 0.5 million and $ 3.1 million, respectively. Share-based compensation is included in selling, general, and administrative expenses in our consolidated statements of comprehensive income (loss). As of December 31, 2023 , there was $ 0.15 million of total unrecognized compensation cost related to all non-vested share-based compensation awards. That cost is expected to be recognized over a weighted-average period of approximately 1.4 years. Stock Incentive Plans 2019 Long-Term Incentive Equity Plan We adopted a long-term incentive equity plan in August 2019 that, as amended in January 2021 and January 2023, provides for the grant of stock-based awards to employees, officers, directors, and consultants, not to exceed 30.0 million shares of common stock (the “2019 Plan”). The 2019 Plan provides for benefits in the form of nonqualified stock options, stock appreciation rights, restricted stock awards, and other stock-based awards. Forfeited and expired options under the 2019 Plan become available for reissuance. The plan provides that non-employee directors may not be granted awards during any calendar year that exceed the lesser of 1.0 million shares or $ 175,000 in value, calculated based on grant-date fair value. At December 31, 2023 , we had outstanding options for the purchase of up to 24,730,086 shares and we had 1,136,467 shares of common stock available for future grants under the 2019 Plan. 47 Table of Contents 2011 Long-Term Incentive Equity Plan We adopted a shareholder approved long-term incentive equity plan in September 2011 that was amended in 2014, 2016 and 2017 and provided for the grant of stock-based awards to employees, officers, directors and consultants, not to exceed 3.0 million shares of common stock (the “2011 Plan”). In January 2023, we ceased any future grants under the 2011 Plan. At December 31, 2023 , we had outstanding options for the purchase of up to 1,103,969 shares under the 2011 Plan. Upon the exercise or expiration of these remaining outstanding options, the 2011 Plan will be terminated. 2008 Equity Incentive Plan We adopted an equity incentive plan in August 2008 ( the “2008 Plan”) for the grant of stock-based awards to employees (excluding named executives), directors and consultants, not to exceed 50,000 shares of common stock. We had no outstanding options for purchase of shares under the 2008 Plan and in January 2023, the 2008 Plan was terminated. Restricted Stock Awards RSAs are issued as executive and employee incentive compensation and as payment for services to others. The value of the award is based on the closing price of our common stock on the date of grant. RSAs are generally immediately vested. From time to time, we issue fully vested share-based compensation awards to third parties as prepaid retainers for services over a specified period. The grant date fair value of these awards is recorded as prepaid services and expensed to selling, general and administrative expense over the service period (see Note 5 ). Restricted Stock Units RSUs are issued as incentive compensation to executives, employees, and non-employee directors. Each RSU represents a right to one share of our common stock, upon vesting. The RSUs are not entitled to voting rights or dividends, if any, until vested. RSUs generally vest over a one to three year period for employee awards and a one year period for non-employee director awards. The fair value of RSUs is generally based on the closing price of our common stock on the date of grant and is amortized to share-based compensation expense over the estimated life of the award, generally the vesting period. RSAs and RSUs The following table presents a summary of RSA and RSU activity under the 2011 and 2019 Plans (collectively, the “Stock Plans”) as of December 31, 2023 (shares in thousands): Non-vested Shares Shares Weighted-Average Grant Date Fair Value Non-vested at beginning of year - Granted 370 0.30 Vested ( 370 ) 0.30 Forfeited - - Non-vested at end of year - $ - The total fair value of RSAs and RSUs vested under the Stock Plans for the years ended December 31, 2023 and 2022 was approximately $ 0.1 million and $ 0.03 million, respectively. 48 Table of Contents Stock Options Stock options are issued as incentive compensation to executives, employees, consultants and non-employee directors. Stock options are granted with exercise prices at or above fair market value of the underlying shares at the date of grant. Fair market value of the underlying shares is determined based on observable market prices at the date of the grant. The fair value of options granted is estimated using the Black-Scholes option pricing model. Generally, fair value is determined as of the grant date. Options for employees, including executives and non-employee directors, are generally granted under the Stock Plans. The following table presents a summary of option activity under the Stock Plans for the year ended December 31, 2023 (shares in thousands): Shares Weighted- Average Exercise Price Weighted-Average Remaining Contractual Term (in years) Aggregate Intrinsic Value ($) Outstanding at beginning of year 24,180 $ 0.41 Granted 2,000 0.26 Exercised ( 21 ) 0.17 Forfeited/Expired ( 325 ) 0.86 Outstanding at end of year 25,834 0.40 2.5 $ - Vested at end of year 24,659 $ 0.40 2.4 $ - The weighted average per share fair value of options granted under the Stock Plans during the years ended December 31, 2023 and 2022 was $ 0.24 and $ 0.17 , respectively. The total fair value of option shares vested was $ 0.4 million and $ 3.0 million for the years ended December 31, 2023 and 2022 , respectively. The fair value of option grants under the Stock Plans for the years ended December 31, 2023 and 2022 , respectively, was estimated using the Black-Scholes option-pricing model with the following assumptions: Year ended December 31, 2023 2022 Expected option term (in years) 1 5 5 Expected volatility factor 2 150.9 - 155.9 % 143.9 - 155.9 % Risk-free interest rate 3 3.60 - 4.45 % 3.05 - 4.09 % Expected annual dividend yield 0 % 0 % 1 The expected term was generally determined based on historical activity for grants with similar terms and for similar groups of employees and represents the period of time that options are expected to be outstanding. For employee options, groups of employees with similar historical exercise behavior are considered separately for valuation purposes. 2 The stock volatility for each grant is measured using the weighted average of historical daily price changes of our common stock over the most recent period equal to the expected option life of the grant. 3 The risk-free interest rate for periods equal to the expected term of the share option is based on the U.S. Treasury yield curve in effect at the measurement date. 49 Table of Contents Options by Price Range The options outstanding at December 31, 2023 under the Stock Plans have exercise price ranges, weighted average contractual lives, and weighted average exercise prices as follows (weighted average lives in years and shares in thousands): Options Outstanding Options Vested Range of Exercise Prices Number Outstanding at December 31, 2023 Wtd. Avg. Exercise Price Wtd. Avg. Remaining Contractual Life Number Exercisable at December 31, 2023 Wtd. Avg. Exercise Price Wtd. Avg. Remaining Contractual Life $0.171 - $0.3001 11,458 $ 0.19 3.1 10,283 $ 0.18 3.0 $0.33 - $0.495 550 0.33 3.1 550 0.33 3.1 $0.50 - $0.75 13,553 0.54 2.0 13,553 0.54 2.0 $1.98 - $2.97 273 1.98 0.6 273 1.98 0.6 25,834 $ 0.40 2.5 24,659 $ 0.40 2.4 We issue new shares of our common stock upon exercise of options or vesting of RSUs or RSAs under the Stock Plans. The shares underlying the Stock Plans are registered. Cash received from option exercises for the years ended December 31, 2023 and 2022 , was $ 0.004 million and $ 0.083 million, respectively. 16. RELATED PARTY TRANSACTIONS We paid approximately $ 0.05 million and $ 0.01 million in 2023 and 2022 , respectively, for patent-related legal services to SKGF, of which Robert Sterne, one of our directors since September 2006, is a partner. In addition, we paid approximately $ 0.2 million and $ 0.1 million in 2023 and 2022 , respectively, for principal and interest on the SKGF Note (see Note 8 ). The SKGF Note has an outstanding balance, including accrued interest, of approximately $ 0.5 million at December 31, 2023 . In April 2023, we entered into a consulting services agreement with Lewis Titterton to provide short-term advisory services to our chief executive officer in connection with the restructuring of the Brickell funding agreements. As consideration for services under the agreement, we issued 250,000 unregistered shares of our common stock valued at approximately $ 0.03 million. The consideration was recognized fully in the second quarter of 2023, prior to Mr. Titterton being appointed to the Board. As of December 31, 2023, Mr. Titterton holds an aggregate of $ 0.33 million in promissory notes, convertible into 2.7 million shares of common stock, that were purchased from 2019 to 2022 prior to being appointed to the Board. In May 2022, we sold an aggregate of $ 0.1 million in promissory notes, convertible into shares of our common stock at a fixed conversion price of $ 0.13 to Paul Rosenbaum, one of our directors. In September 2023, we sold an additional $ 0.1 million in promissory notes, convertible into shares of our common stock at a fixed conversion price of $ 0.25 to Mr. Rosenbaum. As of December 31, 2023 , Mr. Rosenbaum holds $ 0.2 million of our convertible promissory notes convertible into 1.2 million shares of common stock. In August 2022, we sold an aggregate of $ 0.03 million in promissory notes, convertible into approximately 0.2 million shares of our common stock at a fixed conversion price of $ 0.13 to Sanford Litvack, who became an independent director in October 2022. In January 2023, Mr. Litvack purchased 62,500 shares of our common stock at $ 0.16 per share in a private placement transaction. 50 Table of Contents 17. CONCENTRATIONS OF CREDIT RISK Financial instruments that potentially subject us to a concentration of credit risk principally consist of cash and cash equivalents. Cash and cash equivalents are primarily held in bank accounts and overnight investments. At times our cash balances on deposit with banks may exceed the balance insured by the Federal Deposit Insurance Corporation (F.D.I.C.). 51 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. None.