PARKERVISION INC 10-K

Item 8. Financial Statements and Supplementary Data. Index to Consolidated Financial Statements Page REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM (FRAZIER & DEETER, LLC, PCAOB ID: 215 ) 22 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM (MSL, P.A., PCAOB ID: 569) 24 FINANCIAL STATEMENTS: Consolidated Balance Sheets – December 31, 2024 and 2023 26 Consolidated Statements of Comprehensive (Loss) Income - for the years ended December 31, 2024 and 2023 27 Consolidated Statements of Shareholders’ Deficit - for the years ended December 31, 2024 and 2023 28 Consolidated Statements of Cash Flows - for the years ended December 31, 2024 and 2023 29 Notes to Consolidated Financial Statements - December 31, 2024 and 2023 30 SUPPLEMENTARY DATA: Not applicable 21 Table of Contents REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Shareholders and Board of Directors of ParkerVision, Inc. Opinion on the Consolidated Financial Statements We have audited the accompanying consolidated balance sheet of ParkerVision, Inc. (the “Company”) as of December 31, 2024, and the related consolidated statements of comprehensive (loss) income, changes in shareholders’ deficit and cash flows for the year then ended, and the related notes (collectively referred to as the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2024, and the results of its operations and cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America. We also have audited the adjustments to the 2023 information in Note 17 to retrospectively apply the change in accounting (resulting from the adoption of Accounting Standards Update (ASU) 2023-07, Segment Reporting Topic 280): Improvements to Reportable Segment Disclosures) , as described in Note 1. In our opinion, such adjustments are appropriate and have been properly applied. We were not engaged to audit, review, or apply any procedures to the 2023 financial statements of the Company other than with respect to such adjustments and, accordingly, we do not express an opinion or any other form of assurance on the 2023 financial statements taken as a whole. Substantial Doubt About the Company'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 has losses from operations, negative operating cash flows and an accumulated deficit. These factors raise substantial doubt about the Company's ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 2. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. Basis for Opinion These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As a part of our audit, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. Our audit included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audit provides a reasonable basis for our opinion. 22 Table of Contents Critical Audit Matter The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates 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 the critical audit matter 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 matter below, providing separate opinions on the critical audit matter or on the accounts or disclosures to which they relate. Fair Value of Contingent Payment Obligations As described in Notes 1, 9 and 10 to the consolidated financial statements, the Company has recorded the contingent payment obligations at fair value as of December 31, 2024. To determine the fair value of contingent payment obligations, the Company uses a present value technique based on discounted cash flows to estimate the fair value. We determined the fair value of the contingent payment obligations listed above was a critical audit matter because the fair value estimates require significant estimates and assumptions by management, including those relating to future patent-related cash proceeds and discount rates. Testing these estimates and obtaining sufficient audit evidence involved increased auditor judgment and effort. Our audit procedures related to the valuation of the contingent payment obligations included the following, among others: ● We obtained an understanding and evaluated the appropriateness of management's valuation methodology, including testing the mathematical accuracy of the calculation. ● We engaged an external patent litigation specialist to assist with discussions with the Company's patent litigation attorneys in understanding and evaluating significant assumptions used in management's estimate of the fair value of the contingent payment obligations. ● We performed sensitivity analyses of the timing of future cash flows to evaluate changes in the fair value of the contingent payment obligations. ● We utilized our internal valuation specialist to evaluate the methodology and significant assumptions used in calculating the credit risk portion of the discount rate utilized by management in estimating the fair value of the contingent payment obligations. /s/ Frazier & Deeter, LLC We have served as the Company’s auditor since 2024. Atlanta, Georgia March 24, 2025 23 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, before the effects of the adjustments to retrospectively apply the change in accounting described in Notes 1 and 17, and the disclosure of “Segment Information” (as described in Note 17), the accompanying consolidated balance sheet of ParkerVision, Inc. (the “Company”) and its subsidiary as of December 31, 2023, and the related consolidated statements of comprehensive income, shareholders’ deficit, and cash flows for the year ended December 31, 2023, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements referred to above, before the effects of the adjustments to retrospectively apply the change in accounting (as described in Notes 1 and 17), and disclosure of “Segment Information” (as described in Note 17) , present fairly, in all material respects, the financial position of the Company and its subsidiary as of December 31, 2023, and the results of their operations and their cash flows for the year ended December 31, 2023, in conformity with accounting principles generally accepted in the United States of America. We were not engaged to audit, review, or apply any procedures to the adjustments to retrospectively apply the change in accounting (as described in Notes 1 and 17), and disclosure of “Segment Information” (as described in Note 17), and, accordingly, we do not express an opinion or any other form of assurance about whether such adjustments are appropriate and have been properly applied. Those adjustments were audited by Frazier & Deeter, LLC. 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 audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. 24 Table of Contents Basis for Opinion (Continued) We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audit included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audit provides a reasonable basis for our opinion. /s/ MSL, P.A. We have served as the Company’s auditor from 2019-2024. Fort Lauderdale, Florida March 21, 2024 25 Table of Contents PARKERVISION, INC. CONSOLIDATED BALANCE SHEETS December 31, 2024 and 2023 (in thousands) 2024 2023 CURRENT ASSETS: Cash and cash equivalents $ 4,918 $ 2,560 Prepaid expenses 93 61 Other current assets 34 34 Total current assets 5,045 2,655 Intangible assets, net 832 1,055 Other assets, net 2 313 Total assets $ 5,879 $ 4,023 CURRENT LIABILITIES: Accounts payable $ 507 $ 573 Accrued expenses: Salaries and wages 709 23 Professional fees 104 67 Other accrued expenses 449 447 Convertible notes, current portion 500 970 Related party convertible notes, current portion - 75 Related party note payable, current portion 139 134 Total current liabilities 2,408 2,289 LONG-TERM LIABILITIES: Secured contingent payment obligation 40,724 29,402 Unsecured contingent payment obligations 5,935 7,618 Convertible notes, net of current portion 2,798 3,418 Related party convertible notes, net of current portion 225 475 Related party note payable, net of current portion 201 340 Total long-term liabilities 49,883 41,253 Total liabilities 52,291 43,542 COMMITMENTS AND CONTINGENCIES SHAREHOLDERS' DEFICIT: Common stock, $ .01 par value, 225,000 and 175,000 shares authorized, 113,970 and 87,681 issued and outstanding at December 31, 2024 and 2023, respectively 1,140 877 Additional paid-in capital 400,630 393,314 Accumulated deficit ( 448,182 ) ( 433,710 ) Total shareholders' deficit ( 46,412 ) ( 39,519 ) Total liabilities and shareholders' deficit $ 5,879 $ 4,023 The accompanying notes are an integral part of these consolidated financial statements. 26 Table of Contents PARKERVISION, INC. CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME FOR THE YEARS ENDED December 31, 2024 and 2023 (in thousands, except per share amounts) 2024 2023 Licensing revenue $ - $ 25,000 Cost of sales ( 229 ) ( 227 ) Gross margin ( 229 ) 24,773 Selling, general, and administrative expenses 4,262 14,744 Total operating expenses 4,262 14,744 Interest and other income 52 58 Interest and other expense ( 394 ) ( 424 ) Change in fair value of contingent payment obligations ( 9,639 ) ( 148 ) Total interest and other ( 9,981 ) ( 514 ) Net (loss) income before income tax ( 14,472 ) 9,515 Provision for income taxes - - Net (loss) income ( 14,472 ) 9,515 Other comprehensive income, net of tax - - Comprehensive (loss) income $ ( 14,472 ) $ 9,515 (Loss) earnings per common share Basic $ ( 0.16 ) $ 0.11 Diluted $ ( 0.16 ) $ 0.08 Weighted average common shares outstanding Basic 92,150 85,732 Diluted 92,150 119,888 The accompanying notes are an integral part of these consolidated financial statements. 27 Table of Contents PARKERVISION, INC. CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ DEFICIT FOR THE YEARS ENDED December 31, 2024 and 2023 (in thousands) Common Stock Outstanding Common Stock, Par Value Additional Paid-in Capital Accumulated Deficit Total Shareholders' Deficit Balance as of December 31, 2022 81,246 $ 812 391,724 ( 443,225 ) ( 50,689 ) Issuance of common stock and warrants in public and private offerings, net of issuance costs 844 8 422 - 430 Issuance of common stock upon exercise of options and warrants 21 1 3 - 4 Issuance of equity-based instruments for services 495 5 122 - 127 Issuance of common stock upon conversion of and payment of interest in kind on convertible debt 4,875 49 542 - 591 Share-based compensation, net of shares withheld for taxes 200 2 501 - 503 Net income for the year - - - 9,515 9,515 Balance as of December 31, 2023 87,681 877 393,314 ( 433,710 ) ( 39,519 ) Issuance of common stock and warrants in public and private offerings, net of issuance costs 10,000 100 4,900 - 5,000 Issuance of common stock upon exercise of options and warrants, net of deferred offering costs 4,259 42 407 - 449 Issuance of equity-based instruments for services 370 4 90 - 94 Issuance of common stock upon conversion of and payment of interest in kind on convertible debt 11,660 117 1,627 - 1,744 Share-based compensation, net of shares withheld for taxes - - 292 - 292 Net loss for the year - - - ( 14,472 ) ( 14,472 ) Balance as of December 31, 2024 113,970 $ 1,140 $ 400,630 $ ( 448,182 ) $ ( 46,412 ) The accompanying notes are an integral part of these consolidated financial statements. 28 Table of Contents PARKERVISION, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED December 31, 2024 and 2023 (in thousands) 2024 2023 CASH FLOWS FROM OPERATING ACTIVITIES: Net (loss) income $ ( 14,472 ) $ 9,515 Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities: Depreciation and amortization 231 256 Share-based compensation 386 780 Change in fair value of contingent payment obligations 9,639 148 (Gain) loss on disposal/impairment of equipment and intangible assets ( 6 ) 55 Paid in kind interest expense 379 402 Changes in operating assets and liabilities: Prepaid expenses and other assets ( 32 ) ( 1 ) Accounts payable and accrued expenses 659 ( 364 ) Net cash (used in) provided by operating activities ( 3,216 ) 10,791 CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of property and equipment - ( 2 ) Net cash used in investing activities - ( 2 ) CASH FLOWS FROM FINANCING ACTIVITIES: Net proceeds from issuance of common stock and warrants in public and private offerings 5,000 121 Net proceeds from exercise of options and warrants 758 4 Net proceeds from convertible debt financings - 800 Proceeds from contingent payment obligation - 5,000 Repayment of contingent payment obligation - ( 13,925 ) Principal payments on long-term debt ( 184 ) ( 338 ) Net cash provided by (used in) financing activities 5,574 ( 8,338 ) NET CHANGE IN CASH AND CASH EQUIVALENTS 2,358 2,451 CASH AND CASH EQUIVALENTS, beginning of year 2,560 109 CASH AND CASH EQUIVALENTS, end of year $ 4,918 $ 2,560 SUPPLEMENTAL CASH FLOW INFORMATION: Cash paid for interest $ 18 $ 24 Cash paid for income taxes $ - $ - The accompanying notes are an integral part of these consolidated financial statements. 29 Table of Contents PARKERVISION, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2024 and 2023 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 and licensing fundamental wireless technologies. 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, 2024 , ParkerVision GmbH has been dissolved. The dissolution of ParkerVision GMBH had no material 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. Other estimates include the 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. 30 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 (loss) income. 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 10 ). Actual results could differ materially from the estimates made. Changes in fair value, including the component related to imputed interest, are included in the accompanying consolidated statements of comprehensive (loss) income 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, 2024 or 2023 and as of December 31, 2024 and 2023, we had no finance or operating leases with initial lease terms of more than 12 months. 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. 31 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 (loss) income. 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 subjective assumptions and estimates including how long persons 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 14. Estimates of fair value are not intended to predict actual future events or the value ultimately realized by persons who receive equity awards. We account for forfeitures of share-based awards as they occur. Income Taxes The provision for income taxes is based on (loss) income before taxes as reported in the accompanying consolidated statements of comprehensive (loss) income. 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. New Accounting Pronouncements In November 2023, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2023 - 07, Segment Reporting (Topic 280 ) - Improvements to Reportable Segment Disclosures. This update modifies reportable segment disclosure requirements, primarily through enhanced disclosures about segment expenses categorized as significant or regularly provided to the Chief Operating Decision Maker (CODM). In addition, the amendments enhance interim disclosure requirements, clarify circumstances in which an entity can disclose multiple segment measures of profit or loss, and contain other disclosure requirements. ASU 2023 - 07 is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. We adopted this standard during the fiscal year ended December 31, 2024. Other than additional disclosure (see Note 17 ), there was no material impact on our consolidated financial statements upon adoption. In December 2023, the FASB issued ASU 2023 - 09, Income Taxes (Topic 740 ) - Improvements to Income Tax Disclosures. This update requires enhanced disclosures on income taxes paid, adds disaggregation of continuing operations before income taxes between foreign and domestic earnings, and defines specific categories for the reconciliation of jurisdictional tax rate to effective tax rate. This ASU is effective for fiscal years beginning after December 15, 2024, and can be applied on a prospective basis. We are currently evaluating the effect of adopting this new accounting guidance. 32 Table of Contents In November 2024, the FASB issued ASU 2024 - 03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220 - 40 ) - Disaggregation of Income Statement Expenses. This update requires disclosure of the amounts of purchases of inventory, employee compensation, depreciation, and intangible asset amortization included in each relevant expense line item on the income statement. The standard also requires a qualitative description of other amounts included in each relevant expense line item on the income statement that are not separately disclosed. In addition, entities are required to disclose the nature and amount of selling expenses. The amendments in ASU 2024 - 03 are effective for annual periods beginning after December 15, 2026, which for the Company would be applicable to fiscal year 2027, and for subsequent interim periods. Early adoption is permitted and the amendments should be applied on a prospective basis. Retrospective application is permitted. Adoption of this guidance will result in additional disclosures, but we do not expect the adoption of ASU 2024 - 03 to materially impact our consolidated financial statements. In November 2024, the FASB issued ASU 2024 - 04, Debt - Debt with Conversion and Other Options (Subtopic 470 - 20 ) - Induced Conversions of Convertible Debt Instruments. This update clarifies the assessment of whether a transaction should be accounted for as an induced conversion or extinguishment of convertible debt when changes are made to conversion features as part of an offer to settle the instrument. ASU 2024 - 04 is effective for reporting periods beginning after December 15, 2025, and interim periods within those annual reporting periods. Early adoption is permitted for entities that have adopted ASU 2020 - 06. We are currently evaluating the impact of this new accounting guidance. 2. LIQUIDITY AND GOING CONCERN The accompanying consolidated financial statements as of and for the year ended December 31, 2024 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, 2024 , we had cash and cash equivalents of approximately $ 4.9 million, working capital of $ 2.6 million, and an accumulated deficit of approximately $ 448.2 million. For the year ended December 31, 2024 , we incurred a net loss of approximately $ 14.5 million and used cash from operations of approximately $ 3.2 million. For the year ended December 31, 2024 , we made aggregate payments of approximately $ 0.2 million on long-term debt. We received aggregate net proceeds in 2024 from equity-based financings of $ 5.0 million and proceeds from option and warrant exercises of approximately $ 0.8 million. These proceeds will be used to support our operations. 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 $ 1.6 million in convertible debt that, if not converted, or extended in accordance with the terms of the debt, will mature between July 2025 and March 2026. Although all of our convertible notes have conversion prices that are currently below the market price of our common stock, conversion is at the option of the holder and there can be no assurance that the holders will exercise their conversion option prior to maturity. These circumstances indicate there is 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. 33 Table of Contents 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 12 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 contingent 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) the exercise behavior of our convertible note holders, 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 technology licenses 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. 3. REVENUE We recognized no revenue during the year ended December 31, 2024 . During the year ended December 31, 2023 , we recognized $ 25 million of revenue 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, 2024 . 34 Table of Contents 4. (LOSS) EARNINGS PER SHARE Basic (loss) 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, 2024, 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 (loss) earnings per share for the years ended December 31, 2024 and 2023 (net (loss) income and shares in thousands): Year Ended December 31, 2024 2023 Numerator: Net (loss) income $ ( 14,472 ) $ 9,515 Effect of dilutive securities - 402 Net (loss) income adjusted for dilutive effect ( 14,472 ) 9,917 Denominator: Weighted-average basic shares outstanding 92,150 85,732 Effect of dilutive securities - 34,156 Weighted-average diluted shares 92,150 119,888 Basic (loss) earnings per share $ ( 0.16 ) $ 0.11 Diluted (loss) earnings per share $ ( 0.16 ) $ 0.08 Diluted (loss) earnings per common share for the years ended December 31, 2024 and 2023 excludes options, warrants, and shares underlying convertible notes that are anti-dilutive. The anti-dilutive common share equivalents at December 31, 2024 and 2023 were as follows (in thousands): 2024 2023 Options outstanding 25,451 26,034 Warrants outstanding 9,746 10,346 Shares underlying convertible notes 27,724 - 62,921 36,380 35 Table of Contents 5. INTANGIBLE ASSETS Intangible assets consisted of the following at December 31, 2024 and 2023 (in thousands): 2024 2023 Patents and copyrights $ 10,429 $ 10,431 Less accumulated amortization ( 9,597 ) ( 9,376 ) $ 832 $ 1,055 Amortization expense for the years ended December 31, 2024 and 2023 was approximately $ 0.23 million and $ 0.25 million, respectively. Amortization expense of approximately $ 0.23 million was recorded to cost of sales in each of the years ended December 31, 2024 and 2023 as the related patents are directly linked to revenue-generating licenses. Future estimated amortization expense for intangible assets that have remaining unamortized amounts as of December 31, 2024 is as follows (in thousands): 2025 $ 194 2026 134 2027 116 2028 99 2029 69 2030 and thereafter 220 Total $ 832 36 Table of Contents 6. OTHER ACCRUED EXPENSES Other accrued expenses consisted of the following at December 31, 2024 and 2023 (in thousands): 2024 2023 Advances $ 375 $ 375 Accrued interest 64 66 Other accrued expenses 10 6 $ 449 $ 447 Advances include amounts received from litigation counsel as advanced reimbursement of out-of-pocket expenses expected to be incurred by us. 7. NOTES PAYABLE Note Payable to a Related Party We have an unsecured promissory note payable of $ 0.3 million to Sterne, Kessler, Goldstein, & Fox, PLLC (“SKGF”), a related party (see Note 15 ), for outstanding unpaid fees for legal services. The note, as amended, accrues interest at 4 % per annum and provides for monthly payments of principal and interest of $ 12,500 with a final balloon payment of approximately $ 0.02 million due at the maturity date of April 30, 2027. We recognized interest expense of approximately $ 0.02 million related to this note for each of the years ended December 31, 2024 and 2023 . Principal repayments of $ 0.13 million and $ 0.14 million for the years ended December 31, 2024 and 2023 , respectively, are included under the caption "Principal payments on long-term debt" in our consolidated statements of cash flows. Failure to comply with the payment terms of this note constitutes an event of default which, if uncured, will result in the entire unpaid principal balance of the note and any unpaid, accrued interest to become immediately due and payable. In addition, an event of default results in an increase in the interest rate under the notes to a default rate of 12 % per annum. We are currently in compliance with all the terms of the note, as amended. At December 31, 2024 , the aggregate maturities of our notes payable are as follows (in thousands): 2025 $ 139 2026 144 2027 57 Total $ 340 37 Table of Contents 8. 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 generally 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. Upon conversion by the holder, any accrued and unpaid interest, if not paid in cash, is converted into shares of common stock at the conversion price. To date, nearly 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 approximately 60 % of the face value 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. No convertible notes were issued during the year ended December 31, 2024. 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 15 ). 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 ). For the years ended December 31, 2024 and 2023 ,we repaid an aggregate of $ 0.05 million and $ 0.2 million, respectively upon the maturity of convertible notes. Repayments of our convertible notes upon maturity are included in the caption "Principal payments on long-term debt" in our consolidated statements of cash flows. For the years ended December 31, 2024 and 2023 , convertible notes with a face value of $ 1.4 million and $ 0.2 million, respectively, were converted by the holders into 9.6 million and 1.5 million shares of our common stock, respectively. We recognized interest expense of approximately $ 0.4 million during each of the years ended December 31, 2024 and 2023 . We have elected to pay contractual interest in shares of our common stock. For the years ended December 31, 2024 and 2023 , we issued approximately 2,039,000 and 3,336,000 shares of our common stock, respectively, as interest-in-kind payments on our convertible notes. For the years ended December 31, 2024 and 2023 , we amended convertible notes with an aggregate face value of $ 2.35 million and $ 1.18 million, respectively with primary purpose of extending the maturity date of the notes. Each of the amendments was considered to be a troubled debt restructuring in accordance with ASC 470 - 60, and accordingly, the changes were accounted for prospectively and no gain or loss was recognized as a result of the note modifications. At the holders’ option, subject to ownership limitations, the convertible notes outstanding at December 31, 2024 could be converted into an aggregate of approximately 27.7 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. 38 Table of Contents Convertible notes payable to non-related parties at December 31, 2024 and 2023 , consist of the following (in thousands): Fixed Conversion Interest December 31, Description Rate Rate Maturity Date 2024 2023 Convertible notes dated September 18, 2018 $ 0.25 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 2 250 750 Convertible notes dated June 7, 2019 $ 0.10 8.0 % December 1, 2024 3 - 150 Convertible notes dated June/July 2019 $ 0.10 8.0 % June 19, 2024 to March 19, 2026 4 70 120 Convertible notes dated July 18, 2019 $ 0.08 7.5 % July 18, 2025 5 500 700 Convertible notes dated January 8, 2020 $ 0.13 8.0 % January 8, 2026 6 400 400 Convertible notes dated May-August 2022 $ 0.13 8.0 % May 10, 2027 to August 3, 2027 1,053 1,143 Convertible note dated January 11, 2023 $ 0.11 7 9.0 % January 11, 2028 7 500 500 Convertible notes dated January 13, 2023 $ 0.16 9.0 % January 13, 2028 100 200 Total principal balance 3,298 4,388 Less current portion 500 970 $ 2,798 $ 3,418 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. 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. Notes with an aggregate face value of $ 0.5 million were converted, at the holders' option in 2024. 3 On June 3, 2024, this note was amended to extend the maturity date to December 1, 2024. This note was converted, at the option of the holder, into shares of our common stock in October 2024. 4 Between June 18 and July 9, 2024, these notes were amended to extend the maturity dates to January 15, 2026 through March 19, 2026. 5 On June 3, 2024, notes with an aggregate face value of $ 0.2 million were amended to extend their maturity date from July 18, 2024 to December 1, 2024. These notes were subsequently converted at the option of the holders in September 2024 into shares of our common stock. On July 8, 2024, the remaining note, with a face value of $ 0.5 million, was amended to extend its maturity date from July 18, 2024 to December 1, 2024, and to add multiple automatic extensions of the maturity date, provided the holder does not revoke the extension option in writing at least ten ( 10 ) trading days prior to the then applicable maturity date. The first automatic extension extended the maturity date to July 18, 2025, and the subsequent automatic extensions will extend the maturity date by up to ten ( 10 ) one -year periods. 6 On July 8, 2024, a note with a face value of $ 0.4 million was amended to provide for up to ten ( 10 ) one -year automatic extensions of the original maturity date, at the original stated interest rate, provided the holder does not revoke the extension option in writing at least ten ( 10 ) trading days prior to the then applicable maturity date. 7 On July 8, 2024, this note was amended to provide for up to ten ( 10 ) one -year automatic extensions of the original maturity date, at the original stated interest rate, provided the holder does not revoke the extension option in writing at least ten ( 10 ) trading days prior to the then applicable maturity date. In addition, the conversion price was reduced from $ 0.16 to $ 0.11 . 39 Table of Contents Convertible notes payable to related parties at December 31, 2024 and 2023 , consist of the following (in thousands): Fixed Conversion Interest December 31, Description Rate Rate Maturity Date 2024 2023 Convertible notes dated June 19, 2019 $ 0.10 5.0 % 1 March 15, 2026 1 $ - $ 25 Convertible notes dated September 13, 2019 $ 0.10 5.0 % 1 March 15, 2026 1 - 50 Convertible notes dated January 8, 2020 $ 0.13 8.0 % January 8, 2026 - 50 Convertible notes dated May-August 2022 $ 0.13 8.0 % May 10, 2027 to August 3, 2027 225 325 Convertible note dated September 15, 2023 $ 0.25 8.0 % March 15, 2026 - 100 Total principal balance 225 550 Less current portion - 75 $ 225 $ 475 1 On May 10, 2024, convertible notes, held by a director of ours, were amended to extend their maturity date to March 15, 2026 and reduce their interest rate on a going forward basis from 8 % to 5 %. In September 2024, these notes were converted, at the option of the holder, into shares of our common stock. 9. 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, 2024 and 2023 , respectively (in thousands): 2024 2023 Secured contingent payment obligation, beginning of year $ 29,402 $ 40,708 Proceeds from contingent payment obligation - 5,000 Repayment - ( 13,925 ) Change in fair value 11,322 ( 2,381 ) Secured contingent payment obligation, end of year $ 40,724 $ 29,402 40 Table of Contents 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. Since 2016, 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 $ 59.2 million and $ 51.0 million as of December 31, 2024 and 2023 , respectively. The range of potential proceeds payable to Brickell is discussed more fully in Note 10. 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, 2024 , we are in compliance with our obligations under this agreement. 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 10 ). The secured contingent payment obligation is remeasured to fair value at each reporting period with changes recorded in the consolidated statements of comprehensive (loss) income until the contingency is resolved. 41 Table of Contents 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, 2024 and 2023 , respectively (in thousands): 2024 2023 Unsecured contingent payment obligations, beginning of year $ 7,618 $ 5,089 Change in fair value ( 1,683 ) 2,529 Unsecured contingent payment obligations, end of year $ 5,935 $ 7,618  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 (loss) income until the contingency is resolved (see Note 10 ).  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, 2024 , the estimated fair value of unsecured contingent payment obligations related to the Termination Fee is $ 2.7 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, 2024 and 2023 . 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, 2024 , the estimated fair value of our unsecured contingent payment obligations related to the CPRs is $ 3.2 million. 10. 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 42 Table of Contents The following table summarizes financial assets and financial liabilities carried at fair value and measured on a recurring basis as of December 31, 2024 and 2023 , 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, 2024: Liabilities: Secured contingent payment obligation $ 40,724 $ - $ - $ 40,724 Unsecured contingent payment obligations 5,935 - - 5,935 December 31, 2023: Liabilities: Secured contingent payment obligation 29,402 - - 29,402 Unsecured contingent payment obligations 7,618 - - 7,618 For the years ended December 31, 2024 and 2023 , 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 18.27 % and 18.21 %, respectively, at December 31, 2024 , based on a risk-free rate of 4.27 % and 4.21 %, respectively, as adjusted by 8 % for credit risk and 6 % for litigation inherent risk. 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. The following tables provide 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, 2024 and 2023 , respectively, 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. December 31, 2024 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 $ 65.3 $ 150.0 $ 0.0 $ 7.8 $ 10.8 Duration (in years) 1.0 2.8 3.5 1.0 1.6 3.5 Estimated probabilities 15 % 19 % 25 % 15 % 21 % 25 % 43 Table of Contents December 31, 2023 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. 11. INCOME TAXES AND TAX STATUS Our net (loss) income before income tax for the years ended December 31, 2024 and 2023 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 2024 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 2023 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, 2024 and 2023 , respectively are as follows (in thousands): 2024 2023 Tax (benefit) expense at statutory rate $ ( 3,039 ) $ 1,998 State tax (benefit) expense ( 622 ) 409 Change in valuation allowance 4,085 ( 2,512 ) Other ( 424 ) 105 $ - $ - 44 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, 2024 and 2023 (in thousands): 2024 2023 Gross deferred tax assets: Net operating loss carry-forward $ 67,899 $ 70,159 Research and development credit carry-forward 4,011 4,565 Share based compensation 1,797 1,350 Patents and other 580 568 Contingent payment obligations 9,509 7,071 Fixed assets ( 1 ) ( 1 ) Accrued liabilities 171 - Charitable contributions 2 2 83,968 83,714 Less valuation allowance ( 83,968 ) ( 83,714 ) Net deferred tax asset $ - $ - At December 31, 2024 , we had cumulative NOL carry-forwards for income tax purposes of $ 270.8 million, of which $ 230.1 million is subject to expiration in varying amounts from 2025 to 2037. At December 31, 2024 , we also had research and development tax credit carryforwards of $ 4.0 million, which expire in varying amounts from 2025 through 2037. 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, 2024 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 2003 through 2024 tax years. Unrecognized tax benefits due to uncertain tax positions were $ 0.64 million for each of the years ended December 31, 2024 and 2023 . 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. 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, 2024 and 2023 , we did not incur any income tax-related interest income, expense or penalties. 45 Table of Contents 12. 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 On September 6, 2024, the U.S Court of Appeals for the Federal Circuit ("CAFC") issued its opinion, ruling in our favor on each of the issues we appealed and remanding the case back to the Middle District of Florida (Orlando Division) where the case was reopened. The CAFC appeal was filed following several March 2022 district court rulings on pre-trial motions in our patent infringement case against Qualcomm, a case that was originally filed in May 2014. The district court granted Qualcomm motions to strike and exclude our technical expert report, essentially precluding the support of infringement testimony at trial and also issued an order granting Qualcomm's motion for summary judgment ruling that Qualcomm did not infringe the remaining three patents in the case. We appealed these rulings to the CAFC and oral arguments were heard in November 2023. In July 2024, the CAFC issued an order indicating that it did not have jurisdiction over this case as the district court had not entered a final judgement on Qualcomm's counterclaims of invalidity. The parties filed a motion with the district court requesting an order dismissing Qualcomm's counterclaims of invalidity without prejudice. On August 1, 2024, the district court issued such an order, and on August 7, 2024, the matter was transferred back to the CAFC for its decision which was then issued on September 6, 2024. The parties have submitted to the district court a summary of pre-trial motions that remain open and a request for a trial schedule. In addition, Qualcomm has filed a motion for a new claim construction hearing and we have filed a motion to substitute our infringement and validity expert due to the medical incapacity of our current expert. The district court has not yet ruled on these pending motions. The court indicated that it would establish a trial date at a pre-trial conference, following its rulings on outstanding motions. 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. 46 Table of Contents Discovery in this case was closed in January 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, subject to appeal. Citing the backlog due to the pandemic, among other factors, the court moved several scheduled deadlines. Joint pre-trial statements were submitted by the parties in May 2021. 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 had the right to petition the court for its fees and costs, a right that was subsequently mooted given the CAFC's decision to vacate the 2022 summary judgement decision. Our damages expert has submitted a report supporting a 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. ParkerVision v. Apple and Qualcomm (Middle District of Florida-Jacksonville Division) We have a patent infringement case in the Middle District of Florida against Apple Inc. (“Apple”) and Qualcomm, filed in December 2015, alleging infringement of four of our patents, which was subsequently reduced to one patent. 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. 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. 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. One of the seven patents was dropped from the litigation in August 2024. 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 July 2025, although based on ongoing discovery, it is anticipated that this date may be rescheduled. A claim construction hearing was held in June 2024 in the second Realtek action, and the special master appointed by the court recommended the majority of the claim constructions in our favor. The court adopted the special master recommendations in November 2024, and the trial for the second Realtek action has been set for November 2025. 47 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. 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. One of the patents was voluntarily dropped from the first MediaTek case in 2024 and MediaTek likewise terminated an IPR petition it had initiated against the same patent. 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 June 2025, although based on ongoing discovery, it is anticipated that this date will be rescheduled. A claim construction hearing was held in June 2024 in the second MediaTek action, and the special master appointed by the court recommended the majority of the claim constructions in our favor. The court adopted the special master recommendations in January 2025, and the trial for the second MediaTek action has been set for February 2026. The third MediaTek action has a tentative claim construction hearing scheduled for June 2025 with a trial tentatively scheduled for June 2026. 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. 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 which the court denied in August 2024. A claim construction hearing was held in June 2024, and the court issued its final claim construction order in November 2024. A trial was originally set for May 2025, but in December 2024, a revised scheduling order moved the trial date to September 2025. There may be additional changes in the trial schedule based on ongoing discovery. 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 was held in June 2024, and the court issued its final claim construction order in January 2025. A trial has been tentatively scheduled for August 2025, although this date may be changed based on ongoing discovery. Intel (USPTO) v. ParkerVision (PTAB) We appealed an IPR action, originally filed by Intel against our U.S. patent 8,190,108 which was asserted in ParkerVision v. Intel in the Western District of Texas. 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 exercised its right to intervene to defend the PTAB's decision. Oral arguments on our appeal were presented on May 9, 2024 and on May 16, 2024, the CAFC issued a Rule 36 decision upholding the PTAB ruling that the challenged claims are unpatentable. 48 Table of Contents  TCL and LGE. v. ParkerVision (PTAB) We appealed two IPR actions filed by TCL and LGE against our U.S. patent 7,292,835 (“the ‘835 Patent”) and U.S. patent 7,110,444, both of which are asserted in the infringement cases against these parties in the Western District of Texas. In November 2022, the PTAB issued its written decision ruling that the challenged claims for both patents were unpatentable. We appealed these decisions to the CAFC and oral arguments for both appeals were presented to the CAFC on June 3, 2024. On June 5, 2024, the CAFC issued its final decisions, in the form of Rule 36 decisions, affirming the PTAB rulings. On November 4, 2024, we submitted a petition for a Writ of Certiorari with the U.S. Supreme Court challenging the CAFC's use of Rule 36 to affirm PTAB decisions without a written opinion. On March 24, 2025, the Supreme Court denied our petition. 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. In May, 2024, the PTAB instituted the IPR petition. MediaTek withdrew its petition and the IPR was terminated in September 2024, following our dismissal of the '835 Patent from the patent infringement action against MediaTek. MediaTek filed a second petition for IPR in May 2024 against the '686 Patent which is one of the patents asserted in the second MediaTek infringement action. The PTAB instituted this IPR in November 2024 and a final decision is expected in November 2025. In October 2024, MediaTek filed a third petition for IPR against the '593 Patent, one of the patents asserted in the third MediaTek action. The PTAB's institution decision is expected by April 2025. Texas Instruments and NXP v. ParkerVision (PTAB) Texas Instruments filed three petitions for IPR in May 2024 against each of the patents asserted in the TI action. All three IPRs were instituted by the PTAB in November 2024 and a decision is expected by November 2025. NXP filed petitions for IPR against two of the three patents asserted in the NXP action, which are the same as two of the patents asserted in the TI action. Accordingly, in December 2024, the PTAB granted NXP's joinder motion to join the TI petitions. Realtek v. ParkerVision (PTAB) In December 2024, Realtek filed petitions for IPR against two patents asserted in the second Realtek action, which are the same as the two patents under joint IPR by TI and NXP. Realtek has filed a joinder motion to join the TI/NXP proceedings. 13. 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, 2024 , we had no outstanding preferred stock. Common Stock We have 225 million shares of common stock authorized for issuance as of December 31, 2024 . Our shareholders approved amendments to our articles of incorporation in October 2024 increasing the number of our authorized shares of common stock from 175 million to 225 million shares. As of December 31, 2024 , we have 35.2 million shares reserved for issuance under outstanding warrants and options and 27.7 million shares reserved for issuance upon conversion of our outstanding convertible notes. In addition, we have 0.03 million shares reserved for future issuance under equity compensation plans and 0.4 million shares reserved for future issuance upon payment of interest in-kind on our convertible notes.  49 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, 2024 and 2023 (in thousands, except for per share amounts): Date Transaction # of Common Shares/ Units Sold Average Price per Share/ Unit # of Warrants Issued (in 000’s) Average Exercise Price per Warrant Net Proceeds (1) January 2023 Private placement of common stock 844 $ 0.16 - - $ 120 December 2024 Private placement of common stock 10,000 $ 0.50 2,000 $ 0.50 $ 5,000 ( 1 ) After deduction of applicable offering costs. Private Placements In December 2024, we entered into securities purchase agreements with accredited investors for the sale of 10,000,000 shares of our common stock and 2,000,000 warrants at a price of $ 0.50 per share for aggregate gross proceeds of $ 5.0 million. The warrants are exercisable for a period of five years at an exercise price of $0.50 per share and have an estimated fair value of approximately $ 0.8 million. We also entered into a registration rights agreement with the investors pursuant to which we will register the shares, including the shares underlying the warrants. We have committed to file the registration statement by April 15, 2025, and to cause the registration to become effective by May 20, 2025, or, in the event of a full review by the Securities and Exchange Commission, no later than July 15, 2025. The registration rights agreements provide for liquidated damages upon the occurrence of certain events including failure by us to file the registration statement or cause it to become effective by the deadlines set forth above. The amount of liquidated damages is 1.0 % of the aggregate subscription upon the occurrence of the event, and monthly thereafter, up to a maximum of 6.0 %, or approximately $ 0.3 million. 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 a member of our Board. The shares were registered for resale on a registration statement that was declared effective on May 11, 2023 ( File No. 333 - 271651 ). 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 with a corresponding increase in deferred offering costs, included in other assets, in the accompanying consolidated financial statements at December 31, 2023. During the year ended December 31, 2024 , Brickell exercised 2.6 million warrants, resulting in the amortization of the deferred offering costs. We had outstanding warrants for the purchase of up to 9.7 million and 10.3 million shares of our common stock as of December 31, 2024 and 2023 , respectively. The estimated grant date fair value of these warrants of $ 4.0 million and $ 3.5 million for the years ended December 31, 2024 and 2023 , respectively, is included in shareholders’ deficit in our consolidated balance sheets. As of December 31, 2024 , our outstanding warrants have an average exercise price of $ 0.85 per share and a weighted average remaining life of approximately 1.5 years. Cash received from warrant exercises for the year ended December 31, 2024 was approximately $ 0.42 million. No warrants were exercised during the year ended December 31, 2023 . 50 Table of Contents 14. SHARE-BASED COMPENSATION For the years ended December 31, 2024 and 2023 , we recognized share-based compensation expense of approximately $ 0.4 million and $ 0.8 million, respectively. This share-based compensation expense includes in-kind consulting fees paid to third parties for the years ended December 31, 2024 and 2023 of $ 0.09 million and $ 0.3 million, respectively. Share-based compensation, including in-kind consulting, is included in selling, general, and administrative expenses in our consolidated statements of comprehensive (loss) income. As of December 31, 2024 , there was $ 0.26 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 1.2 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, 2024 , we had outstanding options for the purchase of up to 24,521,836 shares under the 2019 Plan, and we had 36,467 shares of common stock available for future grants under the 2019 Plan. 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, 2024 , we had outstanding options for the purchase of up to 679,500 shares under the 2011 Plan. Upon the exercise or expiration of these remaining outstanding options, the 2011 Plan will be terminated. Non-Plan Awards In addition, from time to time, we issue share-based compensation awards to third -party consultants as share-based compensation outside of our stock incentive plans. At December 31, 2024 , we had outstanding options for the purchase of up to 250,000 shares and 250,000 unvested restricted stock awards that were issued as Non-Plan Awards. The shares underlying these awards have not been registered at the time of the award ("Non-Plan Awards"). 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. Restricted Stock Units RSUs are issued as incentive compensation to executives, employees, and non-employee directors and as payment for services to others. 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 and third -party 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. 51 Table of Contents RSAs and RSUs The following table presents a summary of RSA and RSU activity for the year ended December 31, 2024 , all of which represent Non-Plan Awards (shares in thousands): Non-vested Shares Shares Weighted-Average Grant Date Fair Value Non-vested at beginning of year - Granted 620,000 0.29 Vested ( 370,000 ) 0.15 Forfeited - - Non-vested at end of year 250,000 $ 0.50 The RSAs and RSUs activity during the year ended December 31, 2024 included 370,000 RSAs and 250,000 RSUs granted to third parties for services with an aggregate grant date fair value of approximately $ 0.2 million. The total fair value of RSAs and RSUs vested for the years ended December 31, 2023 was approximately $ 0.06 million and $ 0.15 million, respectively. 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 and Non Plan activity for the year ended December 31, 2024 (shares in thousands): Shares Weighted- Average Exercise Price Weighted-Average Remaining Contractual Term (in years) Aggregate Intrinsic Value ($) Outstanding at beginning of year 26,034 $ 0.39 Granted 1,350 0.26 Exercised ( 1,659 ) 0.21 Forfeited/Expired ( 274 ) 1.98 Outstanding at end of year 25,451 0.38 1.6 $ 12,618 Vested at end of year 24,626 $ 0.39 1.6 $ 12,128 The options awarded for the year ended December 31, 2024 included 250,000 nonqualified options issued as Non Plan Awards to third parties for services with a grant date fair value of approximately $ 0.1 million. The weighted average per share fair value of options granted during the years ended December 31, 2024 and 2023 was $ 0.23 and $ 0.17 , respectively. The total fair value of options vested was $ 0.3 million and $ 0.4 million for the years ended December 31, 2024 and 2023 , respectively. 52 Table of Contents The fair value of option grants for the years ended December 31, 2024 and 2023 , respectively, was estimated using the Black-Scholes option-pricing model with the following assumptions: Year ended December 31, 2024 2023 Expected option term (in years) 1 5 5 Expected volatility factor 2 150.6 % 150.9 - 155.9 % Risk-free interest rate 3 3.80 % 3.60 - 4.45 % 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. For third parties, the expected term is estimated to be the contractual life of the related service agreement. 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 term. 3 The risk-free interest rate for periods equal to the option expected term is based on the U.S. Treasury yield curve in effect at the measurement date. Options by Price Range The options outstanding at December 31, 2024 including Stock Plan and NonPlan Awards 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, 2024 Wtd. Avg. Exercise Price Wtd. Avg. Remaining Contractual Life Number Exercisable at December 31, 2024 Wtd. Avg. Exercise Price Wtd. Avg. Remaining Contractual Life $0.171 - $0.3001 11,185 $ 0.19 2.3 10,610 $ 0.19 2.2 $0.33 - $0.495 550 0.33 2.1 550 0.33 2.1 $0.50 - $0.75 13,716 0.54 1.1 13,466 0.54 1.0 25,451 $ 0.38 1.6 24,626 $ 0.39 1.6 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. The shares underlying Non Plan Awards are not registered at the time of the award, but from time to time, such awards may be included in a subsequent registration statement. Cash received from option exercises for the years ended December 31, 2024 and 2023 , was $ 0.34 million and $ 0.004 million, respectively. 53 Table of Contents 15. RELATED PARTY TRANSACTIONS On May 10, 2024, we amended convertible notes held by three of our directors. A June 19, 2019 note with a principal balance of $ 0.03 million and a September 13, 2019 note with a principal balance of $ 0.05 million, both held by Lewis Titterton, were amended to extend the maturity dates to March 15, 2026, reduce the interest rate from 8 % to 5 % and to replace the quarterly interest payments with a single payment of unpaid, accrued interest at the earlier of conversion or maturity of the notes. Additional convertible notes with an aggregate principal balance of $ 0.48 million were also amended to replace the quarterly interest payment dates with a single payment of unpaid, accrued interest at the earlier of conversion or maturity of the notes. These additional amended notes include a $ 0.05 million convertible note dated January 8, 2020 and a $ 0.2 million convertible note dated May 10, 2022, both held by Lewis Titterton, a $ 0.1 million convertible note dated May 10, 2022 and a $ 0.1 million convertible note dated September 15, 2023, both held by Paul Rosenbaum, and a $ 0.03 million convertible note dated August 3, 2022 held by Sanford Litvak. Notes with an aggregate face value of $ 0.33 million were converted by Messrs. Titterton and Rosenbaum in 2024. At December 31, 2024, these three directors hold outstanding convertible notes with an aggregate face value of $ 0.23 million with maturity dates ranging from May 2027 to August 2027 ( see Note 8 ). We paid approximately $ 0.04 million and $ 0.05 million in 2024 and 2023 , 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 for principal and interest on the SKGF Note during each of the years ended December 31, 2024 and 2023 (see Note 7 ). The SKGF Note has an outstanding balance, including accrued interest, of approximately $ 0.3 million at December 31, 2024 . 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 a Non Plan Award of 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. 16. CONCENTRATIONS OF CREDIT RISK Financial instruments that potentially subject us to a concentration of credit risk consist of cash and cash equivalents that are primarily held in bank accounts and overnight investments. We are exposed to credit risk from time to time, subject to federal deposit insurance, in the event of default by the financial institution holding our cash and cash equivalents. The cash and cash equivalents in deposit accounts held in excess of federally insured limits was $ 2.1 million at December 31, 2024 following our closing of an equity-based transaction on December 30, 2024. We mitigate this risk by depositing our cash and cash equivalents with major financial institutions and by ensuring timely transfers of excess funds to a high-yield savings program that offers federal insurance protection through a network of financial institutions. 54 Table of Contents 17. SEGMENT INFORMATION Our operations constitute a single reportable segment, focused on licensing our innovative, fundamental wireless technologies, often through patent infringement enforcement actions. All revenues, operating expenses and assets attributable to this segment are reflected in the consolidated financial statements. Our Chief Executive Officer and Chief Financial Officer, collectively, are considered to be the chief operating decision maker ("CODM"). The CODM uses consolidated net (losses) earnings, along with consideration of certain significant cash and noncash expense categories, to assess performance by comparing to and monitoring against budget and prior year results. This information is used to manage resources and invest in key strategic priorities. Segment information for the years ended December 31, 2024 and 2023 is as follows (in thousands): 2024 2023 Licensing gross margin $ ( 229 ) $ 24,773 Interest and other income 52 58 Cash expenses: Personnel related expenses 2,122 1,705 Litigation & legal expenses 376 11,067 Third-party consulting expenses 173 181 Patent maintenance expenses 149 118 Non-cash expenses: Share-based compensation 292 503 Third-party consulting expenses 94 277 In-kind interest expense 376 402 Change in fair value of contingent payment obligations 9,639 148 Other segment items 1 1,074 915 Net (loss) income $ ( 14,472 ) $ 9,515 1 Other segment items primarily include costs incurred for insurance, shareholder and public relations, audit and other professional fees, outsourced information technology services, and employee travel. Our segment assets represent our total assets as presented on the consolidated balance sheets at December 31, 2024 and 2023 . 55 Table of Contents Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. On November 1, 2024, MSL, P.A. ("MSL") notified our Audit Committee and management that MSL had entered into a transaction with Forvis Mazars, LLP ("Forvis") whereby substantially all of the partners and employees of MSL became partners and employees of Forvis, and MSL would no longer be providing accounting and auditing services and would cease its services as our independent registered public accounting firm upon completion of the review of our Quarterly Report on Form 10-Q for the period ended September 30, 2024. The Audit Committee immediately commenced a search for a new independent registered public accounting firm. MSL’s audit report on our consolidated financial statements as of and for the year ended December 31, 2023 did not contain an adverse opinion or a disclaimer of opinion and was not qualified or modified as to uncertainty, audit scope, or accounting principles, except that MSL’s report for the year ended December 31, 2023 included an explanatory paragraph regarding our ability to continue as a going concern. During the year ended December 31, 2023, and through the subsequent interim period through November 1, 2024, there were (i) no disagreements (as described in Item 304(a)(1)(iv) of Regulation S-K and the related instructions) between us and MSL on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedures, which, if not resolved to MSL’s satisfaction, would have caused MSL to make reference thereto in their reports on the consolidated financial statements for such years, and (ii) no “reportable events” within the meaning if Item 304(a)(1)(v) of Regulation S-K. On December 17, 2024, the Audit Committee engaged Frazier & Deeter, LLC ("FD") as our independent registered public accounting firm for the year ended December 31, 2024. During the fiscal year ended December 31, 2023, and through the subsequent interim period through December 17, 2024 (1) neither we nor anyone acting on our behalf consulted with FD regarding (i) the application of accounting principles to a specific transaction, either completed or proposed, or the type of audit opinion that might be rendered on the our financial statements, (ii) any matter that was the subject of a disagreement as defined in Item 304(a)(1)(iv) of Regulation S-K, and (2) FD did not provide us with any written report or oral advice that FD concluded was an important factor considered by us in reaching a decision as to any accounting, auditing, or financial reporting issue.